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EXHIBIT 8.1
[JAFFE, RAITT, HEUER & WEISS LETTERHEAD]
August 30, 1996
Captec Franchise Capital Partners L.P. IV
24 Frank Lloyd Wright Drive
Lobby L, 4th Floor
P.O. Box 544
Ann Arbor, MI 48106-0544
Re: Captec Franchise Capital Partners L.P. IV
Gentlemen:
We have acted as counsel to Captec Franchise Capital Partners L.P. IV
(the "Partnership"), a Delaware limited partnership, in connection with the
proposed offering of up to 30,000,000 units of limited partnership interests
(the "Units") by the Partnership (the "Offering") as described in the
Registration Statement on Form S-11 filed with the Securities and Exchange
Commission on August 1, 1996 (together with all amendments thereto, the
"Registration Statement").
We have been asked by Captec Franchise Capital Corporation IV, a
Michigan corporation, and Mr. Patrick L. Beach, the general partners of the
Partnership (hereinafter referred to as the "General Partners"), to advise them
of our opinions with respect to certain federal income tax aspects of an
investment in the Partnership. All capitalized terms used but not defined
herein shall have the meanings attributed to such terms in the form of Captec
Franchise Capital Partners L.P. IV Agreement of Limited Partnership (the
"Partnership Agreement"), executed in connection with the Offering as described
in the Registration Statement.
For purposes of this opinion letter, we have examined and relied upon
the following documents (the "Documents"):
1. A copy of the Agreement of Limited Partnership included as an
Exhibit to the Preliminary Prospectus (as such term is defined
below);
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2. The Certificate of Limited Partnership of the Partnership
filed on July 23, 1996.
3. A copy of the Articles of Incorporation of Captec Franchise
Capital Corporation IV;
4. A copy of the Preliminary Prospectus of the Partnership
contained in the Registration Statement (the "Preliminary
Prospectus");
5. A copy of the subscription agreement to be executed by the
Limited Partners of the Partnership and expected to be
accepted by the General Partners (the "Subscription
Agreement");
6. A copy of the proposed selling agreement by and among the
Partnership, the General Partners and Participating Dealer
Agreement (the "Participating Dealer Agreement"); and
7. Such other additional instruments and documents in connection
with the Partnership as we have deemed necessary or
appropriate for the purposes of this opinion.
In our examination we have assumed the authenticity of original
documents, the accuracy of copies, the genuineness of signatures and the
capacity of each party executing a document to so execute such document.
Our opinions are based upon the facts described in the Prospectus and
upon facts as they have been represented to us or determined by us as of this
date. Any alteration of such facts may adversely affect our opinions. For
purposes of our opinions, we have relied upon the representations made by the
General Partners on behalf of the Partnership set forth in the Prospectus. To
the extent that any opinion in this letter relates to or is dependent upon
factual information, or is expressed in terms of our knowledge or awareness, we
have relied exclusively upon the assumptions stated above, and the relevant
factual representations and warranties set forth in the Documents, and we have
not undertaken to independently verify any such facts or information. In this
regard, our knowledge is limited to the conscious awareness of facts or other
information by (i) the attorney executing this opinion on behalf of our firm;
(ii) any attorney in our firm who has been actively involved in (a) negotiating
the terms and conditions of the Documents, (b) drafting the Documents, or (c)
preparing this opinion; and (iii) solely as to information relevant to a
particular opinion or confirmation regarding a particular factual matter, the
attorney in our firm who is primarily responsible for providing the response to
the particular opinion or confirmation addressed in this opinion. Furthermore,
our
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Captec Franchise Capital Partners L.P. IV
August 30, 1996
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opinions are based upon existing statutory law and currently applicable
Treasury Department regulations promulgated or proposed under the Internal
Revenue Code of 1986, as amended (the "Code"), current published administrative
positions of the Internal Revenue Service (the "Service") contained in Revenue
Rulings and Revenue Procedures, and judicial decisions, all of which are
subject to change either prospectively or retroactively.
In the preparation and rendition of our opinions we have followed the
relevant professional standards, including those expressed in American Bar
Association Formal Opinion 346 (Revised), January 29, 1982 ("Opinion 346"),
which directs a lawyer in issuing a tax shelter opinion to consider all
material tax issues and to address fully and fairly in the offering materials
all of such issues which involve the reasonable possibility of challenge by
thet Service.
As more fully described in the "Tax Aspects of the Offering" section
of the Prospectus and specifically subject to the qualifications set forth in
the Prospectus, we have made favorable assessments as to the likely outcome on
the merits of the following federal income tax issues and, accordingly, we
express the following opinions:
(a) that the Partnership will more likely than not be
treated as a partnership for federal income tax
purposes;
(b) that it is more likely than not that: (i) the
allocation of profits and losses in accordance with
the Partnership Agreement will be respected as having
economic effect so long as the allocations do not
cause deficit balances in the Partners' Capital
Accounts (determined as required in Section 1.704-1
(b)(2)(ii)(d) of the Income Tax Regulations and such
economic effect will be substantial; and (ii)
substantially all of the other allocations of profit
and loss attributable to Properties or Equipment will
be considered to be in accordance with the Partners'
interests in the Partnership;
(c) that it is more likely than not that the
Partnership's use of the accrual method of
accounting will be respected;
(d) that, subject to certain factual assumptions
(including the reasonableness of such fees and
expenses), it is more likely than not that deductions
will be available as a matter of law for reasonable
amounts paid or incurred by the Partnership as asset
management fees, tax advice fees, and, under Code
Section 709,
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Captec Franchise Capital Partners L.P. IV
August 30, 1996
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for reasonable amounts paid or incurred by the
Partnership for organizational expenses (which
organizational expenses can be deducted only over a
sixty month period);
(e) that, based on the representations of the General
Partners and of the Limited Partners (as contained in
their Subscription Agreements), the Partnership and
the Limited Partners will be deemed to be engaged in
an activity for profit for purposes of Code Section
183;
(f) that, based on the General Partners' representations
as to the anticipated terms of the leases regarding
the Properties, the Partnership would, more likely
than not, be considered the owner of the Properties
for federal income tax purposes, although this
opinion may change based on the actual terms of the
leases;
(g) that under the statutory language of Code Section
469, the legislative history of such Section and the
proposed and temporary Regulations issued to date,
the income or loss attributable to owning and
operating the Properties and Equipment will more
likely than not be characterized as passive income or
loss to the Limited Partners; and
(h) that substantially more than half of the material tax
benefits, in terms of their financial impact on a
typical investor in the Partnership, will more likely
than not be realized if challenged by the Service.
In issuing this opinion, we are directed by Opinion 346 to consider
all material tax issues and to render an opinion on the outcome of all material
tax issues which involve a reasonable possibility of challenge by the Service.
Accordingly, we are of the opinion that general statements relating to matters
of law in the "Risk Factors - Tax Risks" and "Tax Aspects of the Offering"
sections of the Prospectus are true and correct.
For the reasons stated in the "Tax Aspects of the Offering" section of
the Prospectus, we are of the view that it is not possible, nor will it become
possible prior to the termination of the Offering, for us to reach a judgment
as to the probable outcome on the merits (either favorable or unfavorable) of
the following federal income tax issues and, accordingly, we give no opinion,
nor do we expect to issue an opinion prior to the termination of the Offering,
with respect to whether: (a) the Partnership will be considered a "dealer" in
real estate or equipment at the time of
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Captec Franchise Capital Partners L.P. IV
August 30, 1996
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the sale or other disposition of the Properties or the Equipment, which would
cause the entire gain from such sale or other disposition to be treated as
ordinary income and cause Limited Partners that are tax-exempt entities to
recognize UBTI; (b) a Limited Partner will be deemed to be a "dealer" in
limited partnership interests at the time of sale or other disposition of his
Units, which would result in the entire gain from such sale or other
disposition being treated as ordinary income; (c) the Partnership's
apportionment of the purchase price and expenses between land and depreciable
improvements for the Properties will be substantiated for cost recovery
purposes; and (d) the Properties or Equipment will constitute "tax-exempt use
properties" due to the leasing of space at the Properties to tax-exempt
entities and/or the admission of Limited Partners that are tax-exempt entities,
either of which would cause the Partnership to depreciate a portion of the
Properties or Equipment using the straight-line method of depreciation.
You should note that the opinions contained herein have no binding
effect or official status of any kind. Thus, in the absence of a ruling from
the Service, there can be no assurance that the Service will not challenge the
conclusions or propriety of any of our opinions. In addition, the federal
income tax law is uncertain as to many of the tax matters material to an
investment in the Partnership, and it is not possible to predict with certainty
future legal developments, including how courts will decide various issues if
they are litigated. Accordingly, there can be no absolute assurance of the
outcome of those issues on which we are opining.
We hereby consent to the use of our name in the Registration Statement
and to the filing of this opinion with the Securities and Exchange Commission,
the National Association of Securities Dealers, Inc. and such state securities
administrators or commissions as may be necessary or appropriate.
This opinion may not be relied upon by anyone other than the parties
set forth herein and may not be provided to any party other than those set
forth herein without the express written consent of the undersigned.
Very truly yours,
JAFFE, RAITT, HEUER & WEISS
Professional Corporation
/s/ Robert E. Lewis
Robert E. Lewis
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