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The issue involving the economic substance of ERL’s lease
transaction has twice before been decided in respondent’s favor.
In both Coggin v. Commissioner, T.C. Memo. 1993-209, and Suivski
v. Commissioner, T.C. Memo. 1993-291, this Court held that ERL’s
lease transaction lacked economic substance and, pursuant to the
line of cases identified above, was to be disregarded for Federal
income tax purposes. Petitioners have failed to persuade us that
a different outcome is now appropriate.
On brief, petitioners have expended much effort in an
attempt to convince us that ERL was a legitimate entity that
should not be disregarded as a sham. Despite this effort,
however, we find petitioners’ argument cursory and unconvincing.
We agree with respondent that the majority of the offering
materials consisted of information pertaining to the tax benefits
associated with the venture. We also agree that such material
was extensive and thorough as compared to most of the remaining
contents of the offering materials. The offering materials
provide minimal insight as to the actual profit-making potential
of the coal mining venture. See Rose v. Commissioner, supra at
412.
Petitioners contend that the offering materials focus
principally on the risks rather than the benefits of the
underlying investment. We disagree. Having carefully examined
the offering materials, we are convinced that such materials,
when collectively considered, heavily emphasize relevant tax
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