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Contrary to the above authority and for the limited purpose
of determining the deductibility of losses under section
165(c)(2) relating to the amount of cash invested in
partnerships, petitioners argue that the absence of a profit
objective at the partnership level should be irrelevant, and the
profit objective test should be measured only at the individual
partner level. Petitioners rely on Echols v. Commissioner, 935
F.2d 703, 709 (5th Cir. 1991), revg. and remanding 93 T.C. 553
(1989), as supporting a loss deduction for the amount of cash
they invested in White Rim.
In Echols, however, the profit objective of the partnership
was not at issue. The Echols case involved what was treated as a
legitimate for-profit partnership, and the Court of Appeals for
the Fifth Circuit addressed only the timing and manifestation of
the taxpayers' abandonment of their interest in the partnership
and the worthlessness of their interest in the partnership.
Because the profit objective of the partnership was not
challenged, the Court of Appeals for the Fifth Circuit in Echols
examined only the profit objective at the individual investor
level.
The parties stipulate that White Rim's transactions, for all
relevant purposes, were identical to those of Technology 1980,
one of the partnerships involved in Krause v. Commissioner,
99 T.C. 132 (1992), in which we concluded that the activities and
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