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Petitioners, Donald R. and Ella A. Lawrenz, resided in
Corona Del Mar, California, at the time they filed their
petitions.
On their respective Federal income tax returns for the years
in issue, petitioners claimed large losses and interest
deductions relating to investments as limited partners in Boulder
Oil and Gas Associates (Boulder), Technology Oil and Gas
Associates 1979 (Tech-1979), and Winfield Oil and Gas Associates
(Winfield). Respondent disallowed these claimed losses and
interest deductions, and petitioners filed the instant cases
contesting respondent's adjustments.
After a lengthy trial in the Krause test cases, we
analyzed, primarily at the partnership level, the objective of
the particular partnerships involved in Krause. We concluded
that the partnerships did not have the requisite profit objective
to support the losses claimed, and we sustained respondent's
disallowance of the claimed losses relating to the taxpayers’
investments in the partnerships. Also, on the ground that the
underlying debt obligations did not constitute genuine debt, we
sustained respondent's disallowance of the claimed interest
deductions relating thereto, and we imposed an increased interest
rate under section 6621(c).
We did not, however, in the Krause test case opinion sustain
respondent's determinations under sections 6653(a)(1) and (2),
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