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In general, a taxpayer is entitled to deduct his or her
distributive share of a loss incurred by a partnership to the
extent of the taxpayer's adjusted basis in the partnership. Sec.
704(d); sec. 1.702-2, Income Tax Regs.
Deductions and losses, however, are a matter of legislative
grace, and the taxpayer bears the burden of proving that he is
entitled to the claimed deductions and losses. Rule 142(a); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); Welch v.
Helvering, 290 U.S. 111, 114 (1933).
Petitioner argues that, based on the books and records in
evidence, it has been established that NTG was not financially
successful, that it incurred a loss for 1989, and that
petitioner's share of NTG's loss equaled $35,000.
Respondent argues that petitioner has not satisfied his
burden of establishing that NTG actually incurred a loss in 1989.
The incomplete and inaccurate financial records of NTG that
are in evidence in this case do not adequately establish the
income and expenses of NTG for 1989. The records in evidence
provide only inaccurate financial information with respect to
July, August, and September of 1989. Petitioner acknowledges
that portions of the records submitted are not reliable. With
respect to these records, petitioner testified:
THE COURT: What are you saying? The financial
statements are not accurate, is that what you're
saying?
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Last modified: May 25, 2011