- 125 -
1989), affd. sub nom. Kirchman v. Commissioner, 862 F.2d 1486
(11th Cir. 1989), Killingsworth v. Commissioner, 864 F.2d 1214
(5th Cir. 1989); affd. sub nom. Keane v. Commissioner, 865 F.2d
1088 (9th Cir. 1989), affd. sub nom. Friedman v. Commissioner,
869 F.2d 785 (4th Cir. 1989), affd. sub nom. Dewees v.
Commissioner, 870 F.2d 21 (1st Cir. 1989), affd. sub nom. Kielmar
v. Commissioner, 884 F.2d 959 (7th Cir. 1989), affd. sub nom. Lee
v. Commissioner, 897 F.2d 915 (8th Cir. 1989).
The fact that the partnerships' tax returns reflected
taxable income in later years does not help petitioners. Tax
returns are not proof of the statements made therein. Halle v.
Commissioner, 7 T.C. 245 (1946), affd. 175 F.2d 500 (2d Cir.
1949). The income reported by the partnerships was merely the
unwinding of the circular transactions. The partnerships'
journal-entry recordings of income did not reflect the receipt of
actual income. The unwinding of the circular transactions
provided no increase in wealth, no gain, either to the
partnerships or their partners. Genuine income represents
economic gain, whether calculated under the Haig-Simons
definition, see Haig, The Concept of Income--Economic and Legal
Aspects, in Readings in the Economics of Taxation 54 (Musgrave &
Shoup eds. 1959); Simons, Personal Income Taxation 50 (1938), or
as expansively adumbrated by the Supreme Court in Commissioner v.
Glenshaw Glass Co., 348 U.S. 426, 429-431 (1955). Indeed, it is
the lack of economic reality in the partnerships' reported income
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