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$39,000 to the bank account of NTG. This $39,000 represented
liquidating distributions due petitioner and Mr. Troue with
regard to their former partnership interests in NTGO. Of the
$39,000 NTGO transferred to NTG, $15,000 was attributable to
petitioner's former interest in NTGO.
For 1989, Mr. Troue filed with respondent a Form 941
(Federal Employment Tax Return) with respect to NTG. On the Form
941, Mr. Troue represented that NTG constituted a partnership.
On March 30, 1990, due to disagreement over management of
the law firm, petitioner and Mr. Troue ceased doing business
together and terminated NTG.
On his individual 1989 Federal income tax return, petitioner
reported his interest in a number of partnerships including NTG,
and petitioner claimed a $35,000 partnership loss deduction
relating to NTG.
On audit of petitioner’s individual 1989 Federal income tax
return, respondent disallowed a number of deductions with respect
to petitioner’s real estate business and the claimed $35,000
partnership loss deduction relating to NTG. Prior to trial,
petitioner and respondent settled all of the adjustments
respondent made to petitioner's individual 1989 Federal income
tax return except for the disallowed $35,000 partnership loss
deduction and the negligence penalty.
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