- 91 -
been established that there was an actual investment
associated with the acquisition of the property or that
there was genuine indebtedness in the property." In
further support of the other adjustments, the notices state
that the activity of EA 84-III for 1983, 1984, 1985, and
1986 "was not engaged in for profit."
OPINION
In the subject notices of FPAA, respondent disallowed
the interest and depreciation deductions that each part-
nership claimed on its tax returns for 1983, 1984, and
1985. According to the notices of FPAA, the interest
deductions are disallowed because "it has not been
established that the amounts were for interest on a
bonafide [sic] debt." Similarly, according to the notices
of FPAA, the depreciation deductions are disallowed because
"it has not been established that a bona fide investment
in depreciable property was made."
The interest deductions at issue consist principally,
but not entirely, of amounts paid or accrued with respect
to the nonrecourse promissory notes issued by each
partnership for the purchase of the residential properties
described above. We sometimes refer to the subject
promissory notices as first mortgage notes. The
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