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the applicable statutes permitting those deductions. See New
Colonial Ice Co. v. Helvering, 292 U.S. 435 (1934); Karme v.
Commissioner, 673 F.2d 1062, 1065 (9th Cir. 1982), affg. 73 T.C.
1163 (1980).
Issue 1. Depreciation Deductions Claimed by the Seven Cattle-
Breeding Partnerships in the Instant Cases
Section 167 generally allows as a depreciation deduction a
reasonable allowance for exhaustion and wear and tear of property
used in business or of property held for the production of
income. The person who bears the economic loss of invested
capital resulting from the exhaustion and wear and tear of
business property or property held for the production of income
is the one entitled to the depreciation deduction. See Helvering
v. F. & R. Lazarus & Co., 308 U.S. 252, 254 (1939).
In the instant cases, petitioners and respondent recognize
that for DF #1, SGE 82-1, DGE 84-3, SGE 84-5, DGE 86-2, TBS 89-1,
and TBS 90-1 to be entitled to their claimed depreciation and
other deductions, each partnership must be the owner for tax
purposes of the specific numbers of breeding cattle that it
allegedly purchased and placed in service during the years in
issue. Respondent raises no contention that each partnership was
in an activity not engaged in for profit. Although respondent
has not asserted that each partnership’s transaction was a sham,
the parties disagree to some extent with respect to the
transactions’ economic substance. They disagree over whether
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