Patty K. Copeland, a.k.a. Patty K. White - Page 4




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          leases entered into by the partnerships were not supported by               
          economic substance, did not conform to industry norms, and                  
          precluded any realistic opportunity for profit.  See id. at 169,            
          175.  We sustained respondent's disallowance of the claimed                 
          losses and interest deductions relating to the taxpayers’                   
          investments in the partnerships, and we imposed an increased                
          interest rate under section 6621(c).                                        
               Petitioners herein stipulate that the factual findings made            
          in the Krause test case opinion with regard to the partnerships             
          involved therein also apply to the activities of the Garfield and           
          Cardinal limited partnerships.  We treat this stipulation as an             
          admission that the activities of the Garfield and Cardinal                  
          limited partnerships were not conducted at arm’s length, that               
          they were not legitimate transactions with economic substance,              
          and that they lacked a profit objective.                                    

                                     Discussion                                       
               As we explained in Vanderschraaf v. Commissioner, T.C. Memo.           
          1997-306, affd. without published opinion 211 F.3d 1276 (9th Cir.           
          2000), it is well established that the issue under section 183 as           
          to whether a partnership investment has associated with it                  
          economic substance and a profit objective is determined at the              
          partnership level.  See Pasternak v. Commissioner, 990 F.2d 893,            
          900 (6th Cir. 1993), affg. Donahue v. Commissioner, T.C. Memo.              
          1991-181; Simon v. Commissioner, 830 F.2d 499, 507 (3d Cir.                 





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