- 30 - 1993-251, affd. on this issue and revd. in part without published opinion sub nom. Balboa Energy Fund 1981 v. Commissioner, 85 F.3d 634 (9th Cir. 1996), which held similarly structured oil and gas partnerships--which used up-front accruals of minimum advance royalties to generate claims for large tax deductions that were never paid for--to be sham transactions. In Osterhout, we found that “the objective of the * * * [partnerships at issue in that case] was to help investors avoid taxes and to enrich the coffers of the promoters”, including Meserve, a partner in the law firm rendering the tax opinion for Stonehurst. There are striking parallels between Osterhout and the case at hand. In Osterhout, as in the case at hand, the promotional material emphasized the tax benefits available to investors who would benefit regardless of whether oil and gas were actually discovered. An investor in Stonehurst could seemingly “win” by receiving tax deductions far in excess of the amount paid for the partnership interest even if no oil or gas was produced. See Ferrell v. Commissioner, 90 T.C. at 1183; Osterhout v. Commissioner, supra (citing Barnard v. Commissioner, 731 F.2d 230 (4th Cir. 1984), affg. Fox v. Commissioner, 80 T.C. 972 (1983)). In cases such as Osterhout, where “the promised tax benefits are suspiciously excessive and the transaction is carried out with complete indifference to profit, it is clear the parties intended to structure the transaction for the tax benefits.” Osterhout v. Commissioner, supra (citing Flowers v. Commissioner,Page: Previous 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 Next
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