James L. and Patricia A. Connell - Page 11

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          having subsequently received the tentative refund of the                    
          investment credit carryback of $4,546 to the year 1980.                     
               In the notice of deficiency, respondent disallowed the                 
          losses and credits claimed by petitioners on their 1983 and 1984            
          returns, determining that Series 162 was not an activity engaged            
          in for profit and was devoid of economic substance.                         
               In general, a transaction is effective for income tax                  
          purposes only if its economic substance is consonant with its               
          intended tax effects.  Frank Lyon Co. v. United States, 435 U.S.            
          561, 573 (1978); Knetsch v. United States, 364 U.S. 361, 365-366            
          (1960); Goldstein v. Commissioner, 364 F.2d 734 (2d Cir. 1966),             
          affg. 44 T.C. 284 (1965).  In evaluating whether a transaction              
          possesses economic substance, the Court looks to objective                  
          factors that indicate whether the taxpayer acquired an equity               
          interest in the property, and whether the taxpayer had a                    
          realistic potential for profit.  Levy v. Commissioner, 91 T.C.              
          838, 856 (1988); Cherin v. Commissioner, 89 T.C. 986, 993 (1987);           
          Packard v. Commissioner, 85 T.C. 397, 417 (1985).                           
               The Court applied these objective factors in Barrister                 
          Equipment Associates Series #115 v. Commissioner, T.C. Memo.                
          1994-205, the test case in this Court for the litigation project            
          involving the Barrister partnerships.  In that case, this Court             
          held that the transactions involving Barrister partnerships                 
          Series 115 (Series 115) lacked economic substance and were shams.           





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