Carl J.D. Bauman and Margaret A. Bauman - Page 6

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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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