Patty K. Copeland, a.k.a. Patty K. White - Page 3




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               The activities and transactions of the limited partnerships            
          involved herein, Garfield Oil and Gas Associates, a Utah limited            
          partnership, and Cardinal Oil Technology Partners, a Pennsylvania           
          limited partnership (hereinafter referred to as the Garfield and            
          Cardinal limited partnerships or as the partnerships), are                  
          substantially identical to those of the limited partnerships                
          involved in our test case opinion in Krause v. Commissioner, 99             
          T.C. 132, 133-167 (1992), affd. sub nom. Hildebrand v.                      
          Commissioner, 28 F.3d 1024 (10th Cir. 1994).                                
               On their respective Federal income tax returns for the years           
          in issue, petitioners claimed large losses and interest                     
          deductions relating to their investments as limited partners in             
          the Garfield and Cardinal limited partnerships.  Respondent                 
          disallowed these claimed losses and interest deductions, and                
          petitioners filed the instant petitions contesting respondent's             
          adjustments.  Petitioners now concede all of the originally                 
          claimed tax benefits relating to their investments in the                   
          partnerships, and petitioners seek a loss deduction only for the            
          amount of cash they invested in the partnerships.                           
               After a lengthy trial in the Krause test cases, we analyzed            
          the objectives and activities of the particular partnerships                
          involved in Krause.  We concluded that the partnerships’                    
          activities were not conducted at arm’s length, that they were not           
          legitimate transactions with economic substance, and that they              
          lacked a profit objective.  We concluded that the licenses and              




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