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Thursday, October 16, 2008

Sammy Davis, Jr. Invested in Coal

By Alan Smithee

I just finished reading "Deconstructing Sammy" by Matt Birkbeck. Sammy has been described as the best entertainer of the 20th Century (Elvis really couldn't dance), but most people don't know that he invested in coal. Although it was a bad investment by a bad business partner, it shows that Sammy was one of the few Blacks, then or now, to invest in America's energy sector.

Birkbeck writes:

"The case was known as Davis v. Commissioner and the court was asked to rule on a previous decision that determined Sammy and Altovise were not entitled to deduct losses from tax shelters they invested in over a five-year span, from 1978 to 1982. As an example of the unworthiness of the investments, the court focused on details of one particular shelter, a limited partnership known as Cannel City Associates. Cannel City planned to lease the rights to approximately three thousand acres of land in Kentucky to mine and sell coal in five or ten pound bags to consumers at fifty cents per pound. A market and economic report offered projections of 9 million tons of coal available in reserves in Kentucky, which would be sold at $200 per ton, which was ten times tha actual market price. There was no explanation in the prospectus for the discrepancy between the consumer price and the expected per ton sale price."
Albert "Sonny" Murray, Jr. worked to revive Sammy Davis, Jr.'s estate by settling IRS debts from these types of bad tax shelters. Sonny was the prosecutor who brought down E.F. Hutton and he almost helped Altovise to get back on her feet. Unfortunately she was too broken to fix and Sammy's legacy lingers in oblivion to this day. More on the coal venture:

"Cannel City, said the court, was never a genuine mining operation, with no realistic expectation that the coal could even be dug from the ground, and the lofty market studies predicting millions in revenue were fictitious. The court determined that Cannel City had "no economic substance" and the entire endeavor was a carefully crafted scheme designed to defraud investors, whose money ended up in the account of another shell company, Salem Coal Corporation. By 1983 Sammy and Altovise claimed losses n their tax returns totaling over $2.5 million, which were later denied by the tax court."
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