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(2) Whether notes ERL issued with respect to advance
royalty payments due under a lease agreement represented bona
fide indebtedness. We hold that they did not.
(3) Whether annual payments ERL agreed to pay under a lease
agreement were properly accrued and deducted as advance royalties
due under a minimum royalty provision described under section
1.612-3(b), Income Tax Regs. We hold that they were not.
(4) Whether ERL was engaged in an activity for profit. We
hold that it was not.
(5) Whether petitioners have established their entitlement
to various other deductions stemming from ERL’s mining operations
pursuant to section 183(b). We hold that they have not.
(6) Whether petitioners are liable for the addition to tax
under section 6653(a) for taxable year 1980 and under section
6653(a)(1) and (2), for taxable years 1981 and 1982. We hold
that they are.
(7) Whether the increased interest rate attributable to
tax-motivated transactions under section 6621(c) applies. We
hold that it does to the extent stated herein.
(8) Whether petitioners are liable for the addition to tax
under section 6651(a)(1) for failure to file their 1982 tax
return by the prescribed date. We hold that they are.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the exhibits attached thereto are
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