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In the event that it is determined that there was
an actual investment associated with the
acquisition of the property or that there was
genuine indebtedness on the property, then with
respect to the EPIC Associates 83-XII partner-
ship for the taxable year 1983 [1984 and 1985],
this activity was not engaged in for profit and
only the following deductions are allowable:
(1) The deductions which would be
allowable for the taxable year without
regard to whether or not such activity
is engaged in for profit, and
(2) a deduction equal to the amount
of the deductions which would be
allowable for the taxable year year
[sic] only if such activity were
engaged in for profit, but only to the
extent that the gross income derived
from such activity of the taxable year
exceeds the deductions allowable by
reason of paragraph (1) above.
The notices of FPAA for 1984 and 1985 are virtually
identical.
Respondent made other adjustments to EA 83-XII's
returns for 1983, 1984, and 1985. For taxable year 1983,
respondent disallowed the net investment loss of $341,010
reported for purposes of allocating tax preference items to
its partners, and respondent disallowed the excess expenses
from net lease property of $10,859 and the investment
interest income of $29,306. For taxable years 1984 and
1985, respondent disallowed the qualified investment income
of $303,571 and $330,529, respectively, the qualified
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