- 44 -
217; Sacks v. Commissioner, T.C. Memo. 1994-217, affd. 82 F.3d
918 (9th Cir. 1996).
Petitioners' reliance upon the Court of Appeals for the
Ninth Circuit's partial reversal of our decision in Osterhout v.
Commissioner, T.C. Memo. 1993-251, affd. in part and revd. in
part without published opinion sub nom. Balboa Energy Fund 1981
v. Commissioner, 85 F.3d 634 (9th Cir. 1996), is misplaced. In
Osterhout, we found that certain oil and gas partnerships were
not engaged in a trade or business and sustained the
Commissioner's imposition of the negligence additions to tax with
respect to one of the partners therein.21 The Court of Appeals
for the Ninth Circuit reversed our imposition of the negligence
additions to tax. Petitioners point out that the taxpayer in
that case relied in part upon a tax opinion contained in the
offering materials.
In the cases before us, however, petitioners' purported
reliance on the tax opinion letters is questionable. The tax
opinion letters expressly warned that the investment tax and
business energy credits would be reduced or eliminated if the
Partnerships could not demonstrate that the price paid for the
21 Osterhout v. Commissioner, T.C. Memo. 1993-251, affd. in
part and revd. in part without published opinion sub nom. Balboa
Energy Fund 1981 v. Commissioner, 85 F.3d 634 (9th Cir. 1996),
involved a group of consolidated cases. The parties therein
agreed to be bound by the Court's opinion regarding the
application of the additions to tax under sec. 6653(a), inter
alia. Accordingly, although the Court's analysis focused on one
taxpayer, the additions to tax were sustained with respect to all
of the taxpayers.
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