Malcolm I. Lewin and Trina Lewin - Page 24

                                       - 24 -                                         
          purported reliance on the materials in the memorandum, as well as           
          their advisers, does not relieve them of liability for the                  
          additions to tax for negligence.  Petitioners argue that they are           
          different from the numerous other investors who have negligently            
          speculated on the Plastics Recycling deal because they or their             
          friends had a special relationship with Miller or Becker.  As               
          explained below, we consider this argument to be contrary to the            
          facts of this case and wholly unpersuasive.                                 
               A.  The Memorandum and Petitioners’ Colleagues                         
               1.  The Memorandum                                                     
               Petitioner contends that before purchasing shares in SAB               
          Foam he read the memorandum and its accompanying materials.  The            
          purported value of the recyclers is what generated the deductions           
          and credits.  The memorandum clearly reflects this circumstance.            
          The recyclers, which in fact have a value of no more than $50,000           
          each, were reported by SAB Foam to have a basis of $1,750,000               
          each.  As a result of the purported value of the recyclers,                 
          petitioners’ investment of $12,500 produced for them on their               
          1982 tax return claimed tax credits of $20,021 and deductions of            
          $9,646.  The direct benefits claimed on petitioners’ tax return,            
          from the tax credits alone, far exceeded their cash investment.             
          Like the taxpayers in Provizer v. Commissioner, T.C. Memo. 1992-            
          177, “except for a few weeks at the beginning, petitioners never            
          had any money in the deal.”  Under these circumstances, a                   






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