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Pecaris allocated the gain to its three partners in accordance
with their interests in profits, as specified in the Pecaris
partnership agreement. Accordingly, Pecaris reported
petitioner’s distributive 25-percent share of the gain from the
sale, $827,968, on its Schedule K-1, and that is the amount of
the adjusting increase in petitioner's gain as determined in
respondent's statutory notice to petitioner.
Coastal and petitioner reported the transactions affecting
petitioner’s interest in the Mall as nontaxable transactions on
their respective returns for 1988. The yearend tax balance
sheet, Schedule L of Coastal's 1988 Form 1065, disregarded
petitioner's capital contribution of $700,000 as having any
effect for tax purposes on petitioner's capital account or on
Coastal's basis in the Mall, and showed Coastal as having a cost
basis in the Mall substantially less than $4.8 million, on the
order of what would have been approximately $4.1 million as of
the time of the conveyance of the Mall by Pecaris to Coastal.10
10The Coastal 1988 yearend Schedule L Tax Balance Sheet and
schedules thereto do not disclose or show any note or other
obligation of Coastal to HGM in respect of the $100,000
commission. The Coastal balance sheet and Schedule M
Reconciliation of Partners' Capital Accounts show the following:
Schedule L - Balance Sheet
Assets
Cash $74,886 Current liabilities $102,026
Trade accounts and
receivables 78,159 Mortgages, etc. 4,071,244
(continued...)
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