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Even if taxpayers invest in the partnerships with the
individual objective of making a profit, taxpayers are not
entitled to deduct out-of-pocket cash invested in the
partnerships as losses under section 165(c)(2) if the partnership
transactions lack economic substance. See Illes v. Commissioner,
supra at 165; Hoffpauir v. Commissioner, T.C. Memo. 1996-41;
Schafer v. Commissioner, T.C. Memo. 1994-569; Farmer v.
Commissioner, supra; Wright v. Commissioner, supra; Daoust v.
Commissioner, T.C. Memo. 1994-203; Omerza v. Commissioner, T.C.
Memo. 1992-206.
Further, our finding in Krause v. Commissioner, supra
at 176, that the transactions were tax-motivated and “did not,
and do not, constitute legitimate for-profit business
transactions,” imported that the transactions lacked economic
substance. See Ferguson v. Commissioner, 29 F.3d 98, 102 (2d
Cir. 1994), affg. Peat Oil & Gas Associates v. Commissioner,
100 T.C. 271 (1993); Nickeson v. Commissioner, 962 F.2d 973, 976
(10th Cir. 1992), affg. Brock v. Commissioner, T.C. Memo. 1989-
641; Gardner v. Commissioner, 954 F.2d 836, 839 (2d Cir. 1992),
affg. per curiam Fox v. Commissioner, T.C. Memo. 1988-570; Bohrer
v. Commissioner, 945 F.2d 344, 348 n.5 (10th Cir. 1991), affg.
Glass v. Commissioner, 87 T.C. 1087 (1986); Kirchman v.
Commissioner, 862 F.2d 1486, 1492-1493 (11th Cir. 1989), affg.
Glass v. Commissioner, 87 T.C. 1087 (1986).
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