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For purposes of computing a partner’s capital
account, all partners are entitled to include
their share of partnership debt for which they
assumed personal liability, until they liquidate
their interest in the partnership.
• Any partner having a capital account below zero
has a basis in the partnership below zero.
Pursuant to, and in accordance with, the settlement
agreement and our opinion in Shorthorn Genetic Engg. 1982-2, Ltd.
v. Commissioner, T.C. Memo. 1996-515, the capital account of
petitioner and Mr. Abelein was recomputed, and computational
adjustments were made to the distributive shares of Hoyt
partnership losses claimed by petitioner and Mr. Abelein,
resulting in deficiencies for each of the years at issue. The
adjustments were primarily attributable to the fact that the Hoyt
organization had sold more cattle to the various Hoyt limited
partnerships than it actually owned, see id., and had failed to
properly account for income generated by the sales of calves in
calculating partnership losses, see Bales v. Commissioner, T.C.
Memo. 1989-568. On March 6, 1998, respondent mailed petitioner
and Mr. Abelein a letter that explained how respondent’s
examination of DGE’s partnership returns affected the Abeleins’
income tax liability for taxable years 1982 through 1986.7
7Respondent’s adjustments resulted in reductions of the
Schedule E losses and investment credits the Abeleins claimed
and a disallowance of their IRA contribution deduction so that
the Abeleins’ tax liability was increased for the taxable years
in issue as follows: $4,871 for 1982; $4,573 for 1983; $3,229
(continued...)
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