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reported each partner’s distributive share as $121,000. On
October 20, 1999, petitioner filed his Form 1040, U.S. Individual
Income Tax Return, for the 1998 taxable year reporting zero as
his distributive share of partnership income and filed, along
with his Form 1040, a notice of inconsistent determination
stating that the Form 1065 was replete with factual and legal
inaccuracies.
On October 4, 1999, petitioner filed suit against Mr. Cohen
in the Massachusetts Superior Court requesting damages for breach
of fiduciary duty, breach of contract, deceit, and conversion and
requesting an accounting. Mr. Cohen and petitioner agreed to
keep the partnership receipts in escrow. At the time the lawsuit
was filed, petitioner did not know the sum of the stolen
deposits. During the course of the State court litigation,
petitioner learned that Mr. Cohen had not been forthcoming
regarding all of the partnership’s income. Petitioner prepared
an analysis of the partnership income for the 1998 taxable year
and determined, on the basis of the new agreement and the
information available to him, that he was entitled to
approximately $151,000.2 Mr. Cohen’s position in the lawsuit was
2 Petitioner had previously analyzed the partnership’s
income, but that analysis lacked information regarding the
deposits stolen by Mr. Cohen. The second analysis largely uses
the same information regarding the partnership’s income for 1998
but also includes certain deposits received by petitioner and not
deposited in the partnership account and some of the deposits
(continued...)
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