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credits of $2,924 for 1980, $1,970 for 1981, and $2,381 for 1982.
Respondent disallowed the loss and the investment tax credit.
Petitioners received a total tax refund of $9,629.10 from
their $4,850 payment for an interest in Century, based on
claiming an investment tax credit in 1983, which they carried
back to 1980, 1981, and 1982. By notice of deficiency dated
December 11, 1986, respondent disallowed the investment tax
credit for petitioners' investment in Century for 1980, 1981,
1982, and 1983.
OPINION
1. Whether Petitioners May Deduct the Amount of Cash That
They Invested in Century Concepts, Inc.
Respondent determined that the Century investment program
was a sham designed to obtain deductions for purported tax
losses, tax credits, and nondeductible items. Respondent's
determination is presumed to be correct, and petitioners bear
the burden of proving otherwise. Rule 142(a).
Petitioners contend that they may deduct the cash they
invested in Century software because they had a profit objective
and because their investment was not tax motivated.
A taxpayer may not deduct out-of-pocket cash losses
under section 165(c)(2) from a tax shelter which lacks economic
substance, even if the taxpayer intended to make a profit.
Mahoney v. Commissioner, 808 F.2d 1219, 1220 (6th Cir. 1987),
affg. Forseth v. Commissioner, 85 T.C. 127 (1985); Cherin v.
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