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tax for negligence, for valuation overstatements, and for
substantial understatements of tax.
As indicated, our findings and holdings in Krause v.
Commissioner, supra, were affirmed by the U.S. Court of Appeals
for the Tenth Circuit.
For purposes of this motion for summary judgment,
petitioners concede that no profit objective existed at the White
Rim partnership level, and respondent concedes that profit
objective existed at the individual partner level.
Discussion
Under section 165(a), deductions are allowed for losses
sustained during the taxable year not compensated for by
insurance or otherwise.
Under section 165(c)(2), in order for individual taxpayers
to be entitled to loss deductions with respect to funds invested
in partnerships, the underlying partnership transactions must
have economic substance, and, at the partner level, the
individual taxpayers must have had a profit objective for
investing in the partnerships. See Illes v. Commissioner,
982 F.2d 163, 165 (6th Cir. 1992), affg. per curiam T.C. Memo.
1991-449; Farmer v. Commissioner, T.C. Memo. 1994-342; Wright v.
Commissioner, T.C. Memo. 1994-288.
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