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envisioned by section 1.612-3(b), Income Tax Regs. Bauman I
involved taxable years 1979, 1980, and 1981. Bauman v.
Commissioner, supra.
Subsequent to this Court’s decision in Bauman v.
Commissioner, supra, we decided Coggin v. Commissioner, T.C.
Memo. 1993-209, affd. 71 F.3d 855 (11th Cir. 1996) (occasionally
the Coggin case). The Coggin case was among a number of cases
included in respondent’s national litigation project entitled
McIntyre-CN. Like Bauman in the instant case, the taxpayer in
the Coggin case was a limited partner in ERL. As a majority of
the facts in the Coggin case are identical to the facts in the
instant case, the parties have stipulated pertinent parts of the
record in the Coggin case.
As a result of Bauman’s investment in ERL, petitioners
claimed certain losses and credits on their Federal income tax
returns for 1980, 1981, and 1982. Respondent determined that ERL
was a sham, engaged in solely for the resulting tax benefits, and
disallowed the losses and credits claimed by petitioners for each
year at issue.
Energy Resources, Ltd.
ERL was a Tennessee limited partnership. It operated under
the accrual method of accounting. Investors were solicited
through a private placement memorandum (the offering memorandum
or offering materials) dated October 1, 1980. The offering
materials explained that ERL was organized to lease (the lease)
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