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remaining 25 percent. Prior to making her investment, petitioner
did not independently investigate RCR #1--she did not review or
physically visit its business operations, and she did not seek
outside advice concerning it. The only sheep connected with
David Barnes that she saw prior to her investment were
approximately 10 sheep that were located on David Barnes’s
property, sheep that petitioner believed were being raised by
David Barnes and his daughter as a “4-H” or “Future Farmers”
project.
For taxable year 1981, RCR #1 issued a Schedule K-1,
Partner’s Share of Income, Credits, Deductions, Etc., in
connection with petitioner’s and Mr. Barnes’s investment in that
partnership. The schedule, which was addressed solely to Mr.
Barnes, reflected capital contributions during the year of
$30,020; partner’s share of nonrecourse liabilities of $119,943;
a flowthrough ordinary loss of $29,520; and basis of $151,600 in
property eligible for the investment tax credit (ITC).
At the time of the meeting with Mr. Hoyt in 1981, petitioner
and Mr. Barnes were having marital difficulties. In 1982,
petitioner and Mr. Barnes separated and began living apart, and
in 1986 they were divorced. At the time of the separation, Mr.
Barnes remained in the marital home with the couple’s daughter,
and petitioner moved into an apartment.
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