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carry back losses and credits to prior tax years, and (5)
attempted to monitor and resurrect the investment. Again, we
must reject petitioner’s argument.
We find it incredible that someone with petitioner’s
education and experience would rely on an investment in Madison
to ease immediate employment concerns. Madison did not offer
sufficient cashflow to petitioner to operate as a substitute for
petitioner’s salary, even if the representations in the POM were
accepted at face value.
We also find incredible petitioner’s claim that he did not
know his “tax status” before he invested in Madison. Even if
petitioner was unaware of the exact amount of his 1982 tax
liability when he invested in Madison, he admitted at trial that
he knew his income from Halcon in 1982 would be substantial. A
person with petitioner’s education and experience who knew his
1982 income would be substantial would certainly have reason to
believe that he was facing a significant tax liability for 1982.
Petitioner’s argument that his choice not to invest more
than $75,000 in Madison demonstrates a secondary concern about
tax benefits also defies logic. Claiming large tax benefits
rather than even larger tax benefits does not evidence a profit
motive. Furthermore, if petitioner truly had a profit motive,
the argument could just as easily be made that he would have
invested a larger amount in Madison to get a larger profit.
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