Sharon Lee Bartlett, F.K.A. Heitzman - Page 39

                                       - 39 -                                         

          be ignored with reasonable safety in undertaking a serious                  
          business transaction”); see also Estate of Clopton v.                       
          Commissioner, 93 T.C. 275, 285-286 (1989); Briggs v.                        
          Commissioner, 72 T.C. 646, 656-657 (1979), affd. without                    
          published opinion 665 F.2d 1051 (9th Cir. 1981).                            
               We find that Stonehurst, like the partnerships at issue in             
          Osterhout v. Commissioner, T.C. Memo. 1993-251, was a sham                  
          transaction entered into for tax benefits without any objective             
          possibility of producing an economic profit independent of the              
          contemplated tax benefits that should not be given effect for               
          Federal income tax purposes.  Frank Lyon Co. v. United States,              
          435 U.S. at 573; Ferrell v. Commissioner, 90 T.C. at 1199.  We              
          find that the minimum annual royalty and the intangible drilling            
          costs accrued by Stonehurst in 1979 and claimed by Mr. Heitzman             
          on the 1979 joint return to be completely without basis in fact             
          or law, sec. 6013(e)(2)(B), Belk v. Commissioner, 93 T.C. at 442;           
          Bouskos v. Commissioner, T.C. Memo. 1987-574 citing Douglas v.              
          Commissioner, 86 T.C. at 762-763, and therefore grossly erroneous           
          for purposes of section 6013(e)(1)(B).16                                    




               16 Because we held in Heitzman v. Commissioner, T.C. Memo.             
          1987-109, affd. 859 F.2d 783 (9th Cir. 1988), that neither the              
          minimum annual royalty nor the intangible drilling costs could              
          have been claimed as deductions in 1979, as a matter of law, we             
          also find them to be grossly erroneous as being without basis in            
          law.  Reser v. Commissioner, 112 F.3d 1258, 1265 (5th Cir. 1997),           
          affg. in part and revg. in part T.C. Memo. 1995-572.                        


Page:  Previous  29  30  31  32  33  34  35  36  37  38  39  40  41  42  43  44  45  46  47  48  Next

Last modified: May 25, 2011