- 21 -
92 T.C. 101, 126-129 (1989); FPL Group, Inc. v. Commissioner,
T.C. Memo. 2002-92.
In this case, the figures necessary for the present value
analysis include: (1) The initial cash expenditure; (2) the
annual energy bill of Gould, the end user of the EMS; (3) the
useful life of the EMS; (4) the anticipated energy savings; (5)
the inflation of energy costs; and (6) the appropriate discount
rate. See, e.g., Soriano v. Commissioner, supra at 55. These
figures are then used in the present value analysis described in
Gianaris to arrive at the net present value of the investment in
Sav-Fuel. For the reasons set forth below, after examining the
expert reports and other evidence in the record and assuming
certain figures most favorable to petitioner, we conclude that
the results confirm that Sav-Fuel lacked any reasonable
possibility of a profit independent of tax considerations because
its discounted cashflows (disregarding tax considerations) would
have been negative.
1. Cash Expenditure
The PPM states that Sav-Fuel was offering 23 limited
partnership units at a cost of $62,400 per unit. Investors were
required to contribute $49,900 of the cost in 1980 and $12,500 in
1981. For each unit sold, $2,400 was designated as payment of
legal costs. Therefore, the total cash received by Sav-Fuel for
investment was intended to be $1,380,000. Of this amount,
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011