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Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L.
97-248, sec. 401, 96 Stat. 648. Sam I. Brown, a partner other
than the tax matters partner of Leatherstocking 1983 Partnership
(Leatherstocking), petitioned the Court to readjust partnership
items respondent adjusted for 1983 and 1984. Respondent
determined that Leatherstocking could not deduct $950,907 and
$569,940 of expenses for the respective years because it failed
to establish that its activities were entered into for profit or
for the production of income, or that the “alleged transaction”
had economic substance or reality. Petitioner alleged in the
petition that respondent erred in his determination because
Leatherstocking’s activities were entered into for profit and for
the production of income, and the “alleged transaction” did have
economic substance and reality.
On November 2, 1998, petitioner moved the Court for leave to
amend the petition to allege that respondent had issued the
underlying notices of final partnership administrative adjustment
(FPAAs) after the periods of limitation had expired. The motion
noted that the Court of Appeals for the Second Circuit had
recently decided Transpac Drilling Venture 1982-12 v.
Commissioner, 147 F.3d 221 (2d Cir. 1998), revg. and remanding
T.C. Memo. 1994-26, and stated that the court in that case had
“found on substantially similar facts as the instant case that,
as a result of being placed under investigation by the Internal
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