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707(a) would appear to apply to cause the credit received in
exchange for services rendered to the partnership to be included
in petitioner's gross income as compensation. Shotts v.
Commissioner, T.C. Memo. 1990-641. Be that as it may, respondent
neither made any such adjustment in the statutory notice nor
moved to amend her answer to include it.
Petitioners filed a pretrial motion, which we denied, for
leave to amend petition to compute the reduction in petitioner's
taxable income from Coastal for 1988 that would result from the
increased basis and depreciation of the Mall buildings and
tangible personal property attributable to taxing petitioner on a
distributive share of Pecaris gain on the sale of the Mall. The
record of this case as tried lacks the facts with respect to the
relative values and amounts of purchase price allocable to land
and buildings and other depreciable property needed to make a
Rule 155 computation giving effect to the basis adjustment.
Because Canada Life valued the Mall at $5.5 million,
Coastal's purchase of the Mall for $4.8 million, including the
$700,000 credit, arguably yielded a windfall to Coastal, with 90
percent of the benefit accruing to petitioner. Any excess value
of the Mall that petitioner appropriated should also be added to
petitioner's gross income, resulting in a deficiency in excess of
the amount determined by respondent. Although the actual value
of the Mall may well have exceeded $4.8 million, based upon the
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