- 24 - units in the partnership. A careful consideration of the memorandum, and the discussion of high writeoffs and risk of audit, would have alerted a prudent investor to question the nature of the promised tax benefits. Moreover, the tax opinion made clear that there was no independent evaluation of the SAB Foam transactions. The opinion indicated that Boylan & Evans relied on the statements of the general partner and “other statements of fact and opinion furnished to us by persons familiar with the transaction described in the Memorandum.” Boylan & Evans clearly based its conclusion about the fair market value of the recyclers on the assumption that the parties to the transactions had negotiated prices at arm’s length. In light of the close relationships existing among the parties to the SAB transactions and the enormous price paid for the recyclers (largely with nonrecourse notes exchanged in a plainly circular transaction), petitioner should have questioned whether the prices were in fact negotiated at arm’s length. Under these circumstances, petitioner’s claim that he reasonably and in good faith relied on the tax opinion is unconvincing. A sophisticated, experienced, and intelligent lawyer like petitioner would know, or at least should know, better than to rely blindly upon a document with the warnings and defects of the memorandum.Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Next
Last modified: May 25, 2011