Crop Associates - Page 2

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               HALPERN, Judge:                                                        
          I.  Introduction                                                            
               This case involves a petition for the readjustment of                  
          certain partnership items reported on the 1986 tax return of Crop           
          Associates-1986, a limited partnership with its principal place             
          of business in Coachella, California (the partnership).  The                
          petition was filed by a partner other than the tax matters                  
          partner.  Frederick H. Behrens is the tax matters partner, and,             
          on June 28, 1999, we allowed Mr. Behrens to intervene in the                
          case.  On July 14, 1999, Mr. Behrens (intervenor) moved for leave           
          to file amendment to petition (the motion and the amendment,                
          respectively).  The amendment would add to the petition the                 
          affirmative defense of equitable recoupment.  In support of that            
          defense, the intervenor avers:                                              
                    a.  In 1986, the Partnership deducted a farming                   
               expense [which deduction respondent has disallowed].                   
                    b.  In 1987, the Partnership reported as income an                
               amount equal to the farming expense taken in 1986.                     
                    c.  The [1986 farming expense] * * * and                          
               offsetting adjustment for 1987 arise out of a single                   
               transaction, i.e., a farming contract.                                 
                    d.  This single transaction is subject to two                     
               taxes based on inconsistent legal theories.                            
                    e.  Respondent’s position is that taxes paid for                  
               1987 are statutorily barred from refund.                               

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