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During 1981, Thomas E. Bennett (Bennett) was a vice
president at Ingersoll-Rand Company (Ingersoll-Rand). His
spouse, Joan A. Bennett, was not employed outside the home.
Theodore H. Black (Black) was also a vice president of Ingersoll-
Rand during 1981. His wife, Marilyn F. Black, was not employed
outside the home.
For their respective investments of $25,000, petitioners
Bennett and Black each acquired a 2.605-percent interest in the
limited partnership Empire Associates (Empire) during 1981. As a
result of the passthrough from Empire, on their respective 1981
Federal income tax returns petitioners each deducted an operating
loss in the amount of $20,510 and claimed investment tax credits
in the amount of $42,402. Petitioners Bennett used $22,328 of
the claimed credits on their 1981 return and carried back the
unused portion of the credits to 1978 and 1979 in the respective
amounts of $19,120 and $954. Respondent disallowed petitioners'
claimed deductions and credits related to Empire. In docket No.
31758-85, respondent disallowed petitioners Bennett's claimed
deductions related to three previously mentioned partnerships not
at issue herein.
The facts of the underlying transaction in these cases are
substantially identical to those in Provizer v. Commissioner,
T.C. Memo. 1992-177, and may be summarized as follows. In 1981,
Packaging Industries, Inc. (PI), manufactured and sold seven
Sentinel expanded polyethylene (EPE) recyclers to ECI Corp. for
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