- 6 - The agreement was intended to constitute a preliminary understanding of the parties. To summarize, it stated that (1) in Phase II the parties would draft a final and binding settlement agreement and (2) the investors would then be entitled to deduct, in the first year of the partnerships' operation, 70 percent of the expenses generated by the partnerships' transactions. The remaining 30 percent would be disallowed in the first year, but investors would be entitled to deduct this amount ratably in subsequent years. Mr. Schulman and the IRS, however, never executed a final and binding settlement agreement. On October 12, 1984, petitioner filed his 1983 Federal income tax return. The return claimed $162,460 of loss deductions from Schedule E (Supplemental Income Schedule) attributable to petitioner's allocable share of income and loss from investments in Wolverine and Woodchuck. In Wolverine, Ltd. v. Commissioner, T.C. Memo. 1992-669, affd. without published opinion 39 F.3d 1190 (9th Cir. 1994), we disallowed Wolverine and Woodchuck's claims to interest deductions on their 1983 returns, on the grounds that the partnerships' transactions were tax motivated and lacked economic substance. Petitioner litigated that case on behalf of the partnerships as a partner other than the tax matters partner. On September 23, 1993, respondent issued a notice of deficiency to petitioner. In the notice, respondent determinedPage: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
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