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requirements for deducting the losses in dispute because their
primary objective was to obtain tax benefits. Petitioners
entered into a second stipulation in which they agreed that all
transactions related to the FTI program would be ignored for
Federal income tax purposes.
Although petitioners made one partial payment of
approximately $270,000 in 1990 against their liability for the
taxable years 1978 through 1982, the parties agree that
petitioners have underpayments for those taxable years on which
interest continues to accrue. The parties also agree that
petitioners are entitled to refunds for outstanding overpayments
for the taxable years 1984 and 1985 attributable to the gains
that petitioners reported in those years on transactions
associated with the Merit Securities program.2
After the disposition of the substantive tax shelter
adjustments described above, the Court conducted a trial to
redetermine petitioners' liability for additions to tax and
section 6621(c) interest. In Lincir v. Commissioner, T.C. Memo.
1999-98, the Court sustained respondent's determinations that
petitioners are liable for various additions to tax (including
section 6653(a)(2) for 1981 and 1982) and section 6621(c)
interest for the years in issue. We subsequently ordered the
2 On or about Apr. 7, 1987, to avoid a whipsaw in the event
the Court were to sustain respondent's disallowance of losses
claimed in the taxable years before the Court, petitioners filed
protective claims for refunds of the taxes paid in 1984 and 1985
on the gains reported in those years.
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