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payroll costs over reported partnership income of $13,902. The
reported partnership income was interest income that came from
BBPA. The interest was based upon BBPA's borrowing of the
investors' cash on the line-of-credit note. This income was
offset by a claimed deductible payment to BBPA of professional
fees of $14,366.
Tax Deductions
On their individual income tax return for 1983, the 25
participants in MIT 83 reported Schedule E partnership losses
from MIT 83 in proportion to their interests in the partnership.
Respondent issued a notice of final partnership
administrative adjustment to MIT 83, in which respondent
disallowed the entire claimed MIT 83 partnership loss of
$3,066,626 for the year 1983.
For the period January 1 through June 30, 1983, Machise
accrued and deducted, for Federal income tax purposes, "rents" of
$1,468,830. For the period July 1 through December 31, 1983,
Machise/Intercoastal accrued, and deducted for Federal income tax
purposes, "rents" of $2,061,962. For the two periods, these
amounts totaled $3,530,792, which is 115 percent of the
$3,070,25317 paid by MIT 83 for payroll and independent
contractor costs.
17There is a relatively minor difference between the pre-
override amount that Machise used as a basis for computing its
“rents” for the two 6-month periods in question and the amount
claimed as a loss by MIT 83. The difference reflects an amount
spent by MIT 83 in 1984.
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