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that, with respect to taxable year 1982 as well, ERL’s royalty
obligations are not deductible as advance royalties paid or
accrued “as a result of a minimum royalty provision” under
section 1.612-3(b), Income Tax Regs. Accordingly, we decline
petitioners’ invitation to reverse our earlier decision and
sustain respondent’s determination as to this issue.
Issues 4 & 5. Profit Motive & Substantiation
In the notice of deficiency, respondent also determined that
ERL’s activities were not engaged in for profit. We sustain that
determination, primarily for the reasons stated in Coggin v.
Commissioner, T.C. Memo. 1993-209. Petitioners have adduced no
persuasive evidence or argument to distinguish their case from
Coggin in this respect. The objective facts presented in this
case fail to establish that ERL entered into the lease with an
actual and honest objective of making an economic profit,
independent of tax savings. See generally Drobny v.
Commissioner, 86 T.C. 1326 (1986); Dreicer v. Commissioner, 78
T.C. 642 (1982), affd. without opinion 702 F.2d 1205 (D.C. Cir.
1983). Consequently, we resolve this issue in favor of
respondent.
Petitioners argue in the alternative that, if ERL was not
engaged in an activity for profit, they are entitled to deduct
their allocable share of ERL’s expenses, excluding the royalty
obligations, in accordance with section 183(b) for each year at
issue. Respondent contends that petitioners are in any event
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