Peat Oil & Gas Assocs. v. Commissioner
United States Tax Court
In Smith v. Commissioner, 91 T.C. 733 (1988), the synthetic fuel activities of petitioners were held to lack economic substance, and deductions for license fees, interest expense, and research and development expenses relating to those activities were denied. Held, the deductions claimed by petitioners in subsequent years are denied. Held, further: Smith v. Commissioner, 937 F.2d 1089 (6th Cir. 1991), revg. 91 T.C. 733 (1988), is not followed.
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In Smith v. Commissioner, 91 T.C. 733 (1988), the synthetic fuel activities of petitioners were held to lack economic substance, and deductions for license fees, interest expense, and research and development expenses relating to those activities were denied. Held, the deductions claimed by petitioners in subsequent years are denied. Held, further: Smith v. Commissioner, 937 F.2d 1089 (6th Cir. 1991), revg. 91 T.C. 733 (1988), is not followed. Karr v. Commissioner, 924 F.2d 1018 (11th Cir. 1991), affg. Smith v. Commissioner, 91 T.C. 733 (1988), is followed.
1ConcurrenceSwift, J.
Neither of the two U.S. Courts of Appeals that have already analyzed the precise investment herein, nor any of the other Courts of Appeals, have adopted and applied the “unified” generic tax shelter test of Rose v. Commissioner, 88 T.C. 386 (1987), affd. 868 F.2d 851 (6th Cir. 1989).1 Even the majority’s opinion in this case indicates that “in the future”, majority op. p. 276, the Tax Court may decide not to follow the unified generic tax shelter test of Rose.
I would make that decision now. I would no longer follow Rose, and I would conclude that the test that should be utilized to evaluate…
2Cases cited47 opinions
- Frank Lyon Co. v. United StatesSupreme Court of the United States · 1978
- Helvering v. National Grocery Co.Supreme Court of the United States · 1938
- Commissioner v. GroetzingerSupreme Court of the United States · 1987
- Rose v. CommissionerUnited States Tax Court · 1987
- Antonides v. CommissionerUnited States Tax Court · 1988
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