Bass v. C.I.R., 022288 FEDTAX, 16963-83
|Opinion Judge:||WRIGHT, JUDGE:|
|Party Name:||MARVIN A. BASS AND ELAINE T. BASS, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent|
|Attorney:||Barry I. Fredericks and David M. Brandes, for the petitioners. Patricia A. Donahue and Nancy M. Vinocur, for the respondent.|
|Case Date:||February 22, 1988|
|Court:||United States Tax Court|
MEMORANDUM FINDINGS OF FACT AND OPINION
By a notice of deficiency mailed March 31, 1983, respondent determined a deficiency in petitioners' 1979 Federal income tax in the amount of $11,499.30.
The issues for decision are (1) whether petitioners are entitled to depreciation and advertising expenses deductions for their distributive share of loss taken with respect to their investment in Darmaj Company, a partnership formed to purchase and commercially exploit the film, ‘ Safari Express,‘ (2) whether petitioners are liable for an addition to tax under section 6621(c), and (3) whether damages should be awarded to the United States and against petitioners under section 6673. 
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of facts and attached exhibits are incorporated herein by this reference.
At the time of filing the petition, Marvin A. and Elaine T. Bass resided in Great Neck, New York. Petitioners jointly filed Federal income tax returns for the taxable year 1979, using the cash basis method of accounting. 
Sometime during 1979, one of petitioner's clients, Daniel Sandberg (Sandberg), learned that ‘ Safari Express‘ (sometimes referred to as the film) was available for purchase. Sandberg, who processed motion pictures at TVC Laboratories, was contacted by a colleague, Barry Lieberman (Lieberman), an independent film distributor. Lieberman was representing IBC Distribution Company (IBC), the purported owner of the film. Sandberg viewed the film and decided that it would be a profitable investment. He contacted petitioner, his attorney of several years, who had previously expressed an interest in investing in a film. Sandberg and petitioner invited a third acquaintance, Charles Tolep (Tolep) to view the film.  Tolep was the vice president and general manager of Viacom, a company which produced television feature programs and cable entertainment programs.  Tolep also believed that the film would be a good investment. Thereafter, Sandberg, Tolep and petitioner decided to commence negotiations for the purchase of the film.
‘ Safari Express‘ is a comical action adventure film shot in Central Africa. The director, Duccio Tessari, and the producer, Vittorio Galiano, are both Italian, as is the leading actor, Giuliano Gemma (Gemma). Gemma plays a tour guide in Africa who, along with Biba, the Wonder Chimp, meets and befriends Ursula Andress (Andress) who is suffering from amnesia. The villain, played by Jack Palance (Palance), is attempting to sell guns to rival African tribal factions to cause a war. By inciting a tribal war Palance hopes to secure control over some uranium mines. There is fighting among the African tribesmen and some tribesmen attack Gemma and Andress. Gemma and Andress are rescued by Biba,  and Andress subsequently regains her memory.  Together Gemma and Andress stop the truckload of weapons that Palance had shipped to the warring tribesmen. Gemma and Andress are recaptured by the Africans and are again rescued by Biba. Palance dies in a plane crash. The tribal war was narrowly averted. Because the original soundtrack was partially in Italian many of the voices had to be dubbed into English. The voices of Andress and Palance, although originally in English, had to be synchronized for the film's American distribution.
In December of 1979, petitioner formed a partnership, Darmaj Company (Darmaj), for the purpose of purchasing the film.  The other individuals invited to join Darmaj were Daniel Sandberg, Martin Karlin, Arthur Meisnere and June Jones. Martin Karlin was petitioner's brother-in-law at the time of trial. Karlin made his investment in the film on the basis of petitioner's advice. The partners never met together, and there were no offering materials prepared.
The partners made partnership subscription payments in the following amounts:
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