Carl J.D. Bauman and Margaret A. Bauman - Page 26

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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                     
               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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