August C. Wolf Muriel M. Wolf v. Commissioner Internal Revenue Service

The Internal Revenue Service (IRS) challenged the returns of numerous taxpayers who invested in a tax shelter marketed by Encore Leasing Corporation (Encore). One of them, Wolf, appeals from a decision of the tax court upholding the IRS’s disallowance of several deductions on Wolfs 1979-1982 federal, income tax returns and affirming the IRS’s assessment of additions to tax and penalties. The tax court exercised jurisdic tion pursuant to 26 U.S.C. §§ 6213 , 6214, and 7442. We have jurisdiction over Wolfs timely appeal pursuant to 26 U.S.C. §§ 7482 (a) and 7483. We affirm.

I

Encore was incorporated on February 1, 1982, and was in the business of leasing master recordings of previously released pop and Gospel albums. Collings was its president and sole shareholder.

Encore’s 32-page 1982 prospectus focused primarily on the tax advantages of investing in the Encore program. The prospectus contains only one page which discusses, in general terms, the record industry. The prospectus does not describe the specific master recordings Encore intended to lease or the nontax, economic profitability of Encore’s leasing program. Encore also distributed a “Tax Opinion” prepared by attorney…