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OPINION
I. LFI Issues
In a far-ranging and sometimes unfocused attack on LFI,
respondent, in his notices of deficiency, asserted numerous
grounds for disallowing LFI’s deductions and recalculating LFI’s
distributive net income for the years at issue: (1) Petitioner
has not established the amounts in question were paid or incurred
in a trade or business; (2) Granot Loma was never transferred to
LFI by petitioners and, therefore, LFI is not entitled to
depreciate Granot Loma; (3) petitioner has not established that
he was at risk with respect to LFI; (4) petitioner has not
established that “the activity” was entered into for profit; (5)
petitioner has not established that “the transaction” had
economic substance; (6) petitioner has not established that the
claimed losses were incurred or were otherwise allowable; and (7)
petitioner has not established that “the amounts claimed as
payments were paid, and if paid, were for the purpose as stated.”
Although the parties devoted most of their arguments on
brief to the issue of whether LFI was a trade or business under
section 162 or an activity not engaged in for profit within the
meaning of section 183, the parties also addressed the other
grounds raised in the notices of deficiency as well as an
additional argument under section 280A that was not enumerated
in, or expressly raised by, the notices of deficiency. Because
we believe that the issue regarding the proper tax treatment of
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