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After concessions2 of the parties, the issues remaining for
our consideration are:
1. Whether petitioners, Rhett Rance and Alice Avila Smith;
Joel Rance and LaRhea Smith; and J. Zane and Shannon R. Creese
Smith, are entitled to charitable contribution deductions with
respect to interests in family limited partnerships contributed
to a charitable organization and, if so, what the values of the
charitable contributions are;
2. whether petitioner J. Zane Smith’s dog breeding activity
constitutes an activity engaged in for profit within the meaning
of section 183(a);
3. whether petitioner J. Zane Smith’s cow and dairy farm
activity constitutes an activity engaged in for profit within the
meaning of section 183(a);
2 A large portion of the trial was devoted to the question
of whether an offshore employee leasing arrangement lacked
economic substance and/or was a sham. After presentation of
their case in chief, petitioners conceded that the arrangement
lacked substance and was a sham. Petitioners accordingly
conceded unreported income and overstated interest deductions
related to the offshore arrangement. They also conceded the
applicability of sec. 6662(a) penalties attributable to the
unreported income and overstated interest deductions.
Petitioners conceded that the 6-year period for assessment under
sec. 6501(e)(1)(A) applied with regard to their 1998, 1999, and
2000 tax years. Respondent conceded that petitioners Rhett Rance
Smith (Rhett) and Alice Avila Smith (Alice) substantiated cash
charitable contributions of $217,481 for the year 2002 and that
they are entitled to reduce their 2002 income by $214,970.
Respondent also conceded the issue he raised at trial, that the
contributions of business interests were not completed gifts.
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