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prospective settlement of the partnership proceedings, pursuant
to which the business energy investment credit would be
disallowed for 1985, while a regular investment credit would be
allowed for 1985 and then subject to recapture in 1986.
Consistent with this settlement, respondent determined
petitioners’ share of the investment credit for 1985 to be
$114,000 and their recapture liability for 1986 to be $63,270.
The settlement with Ethanol was finalized and decision was
entered by this Court on May 19, 1994.
Discussion
This opinion is concerned only with the regular investment
credit claimed by petitioners, which respondent for the most part
allowed. The business energy investment credit which petitioners
also claimed and which respondent disallowed is not at issue and
may be disregarded. Petitioners’ main argument may be summarized
as follows. There can be no liability for recapture of an
investment credit that was not used. Use of an allowable
investment credit is optional. Although petitioners originally
claimed an investment credit on partnership section 38 property
for the 1985 taxable year, they subsequently filed an amended
return deleting the credit. By assessing the additional tax
shown on the amended return, respondent allowed them to revoke
their original claim. This left them in the same position as if
they had never claimed the credit.3 Accordingly, when in 1986
3 Petitioners conveniently overlook the fact that when they
recalculated their tax liability on the amended return for 1986,
they neglected to delete the investment credit carryover that
(continued...)
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