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production of income to which each partner contributes one or
both of the ingredients of income, which are capital or service.
References to partnership income in Commissioner v.
Culbertson, supra, as well as in Commissioner v. Tower, 327 U.S.
280 (1946), and Form Builders, Inc. v. Commissioner, T.C. Memo.
1990-75, involve the issue of whether a taxpayer is to be treated
as having invested in a partnership, as distinguished from an
investment in some other type of taxable entity, an issue
different from the issue of whether the underlying activity of
the partnership was entered into for profit.
In cases such as Krause v. Commissioner, 99 T.C. 132 (1992),
and the instant cases, the focus of the analysis is on whether
the underlying activity entered into by the partnerships was
supported by economic substance and profit objective. See, e.g.,
Independent Elec. Supply, Inc. v. Commissioner, 781 F.2d 724, 726
(9th Cir. 1986), affg. Lahr v. Commissioner, T.C. Memo. 1984-472
(citing Hirsch v. Commissioner, 315 F.2d 731, 736 (9th Cir.
1963), affg. T.C. Memo. 1961-256); Krause v. Commissioner, supra
at 168 (citing Nickeson v. Commissioner, 962 F.2d 973 (10th Cir.
1992), affg. Brock v. Commissioner, T.C. Memo. 1989-641). In
that context and in regard to that particular issue, a court
decision that a partnership activity does not constitute a trade
or business, has no economic substance, or lacks a profit
objective, does not constitute, and is not equivalent to, a
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