3
The issues for decision are:
(1) Whether petitioner Sands is entitled to deductions
related to Lone Star Associates (Lone Star), a partnership. We
hold that she is to the extent stated herein.
(2) Whether, pursuant to the doctrines of res judicata or
collateral estoppel, respondent must offer petitioner Sands a
settlement for the taxable years 1984, 1985, and 1986 analogous
to the settlement between petitioner Murphy and respondent for
the taxable years 1985 and 1986. We hold that respondent is not
required to offer Sands the settlement.
(3) Whether Lone Star received $258,968 from Electro in
cancellation of a lease. We hold that it did not.
(4) Whether Lone Star recognized income when it was
released from a debt obligation. We hold that it did.
(5) Whether, in 1989, petitioner Murphy owned a 9.53-
percent interest or a 50-percent interest in Lone Star. We hold
that Murphy owned a 9.53-percent interest in Lone Star in 1989.
(6) Whether petitioners are liable for increased interest
under section 6621. We hold that they are not.
(7) Whether petitioner Sands is liable for additions to tax
for negligence under section 6653(a)(1) and (2) for the taxable
2(...continued)
refer to this section as sec. 6621(c). The annual rate of
interest under sec. 6621(c) for interest accruing after Dec. 31,
1984, equals 120 percent of the interest payable under sec. 6601
with respect to any substantial underpayment attributable to tax-
motivated transactions.
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