- 32 -
of $320, resulting in a tax benefit of approximately $160. By
notice of deficiency dated August 21, 1989, respondent disallowed
the partnership losses relating to JDP that petitioners Houser
had claimed for 1981 and 1982 on the grounds:
1. It has not been established that the
partnership is engaged in a trade or business or that
the partnership engaged in the activity with the
primary purpose of making a profit.
2. It has not been established that any claimed
deductions for research and development expenses
represent an expenditure for or related to research and
development actually undertaken.
3. It has not been established that the amount
proven to be expended, if any, in relation to alleged
research and development are currently deductible and
are not capital expenditures.
4. It has not been established that you had any
amount at risk, as defined by Section 465 of the
Internal Revenue Code.
5. It has not been established that purported
transactions contained any economic reality or
substance.
6. It has not been established that the accrual
method of accounting clearly reflects the partnership
income.
7. It has not been established that any amount
deducted for research and development expenses was paid
or incurred in connection with the partnership's trade
or business.
B. The Jojoba Plantation
For convenience, we use the name "Turtleback I" hereafter to
refer to the 80-acre jojoba plantation for which the expenses at
issue in the instant cases ostensibly were incurred. HJI
purportedly allocated 60 of those acres to JDP and the other 20
Page: Previous 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 NextLast modified: May 25, 2011