Lucian T. Baldwin, III - Page 24

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          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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