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Litigation Project. Petitioner was general counsel of Securities
for many years. He is also a practicing member of the Bar of
this Court.
For the years in issue, petitioner received Schedules K-1
from Securities reflecting his distributive share of items of
partnership income and loss, and cash distributions representing
guaranteed payments from Securities. The Schedule K-1 for 1980
shows that petitioner received $39,024 as a guaranteed payment in
that year. The Schedule K-1 for 1981 shows that petitioner
received $24,220 as a guaranteed payment in that year.
On Schedule E of their 1980 Federal income tax return,
petitioners reported, with respect to Securities, a loss in the
amount of $97,669, and income in the amount of $39,024, which was
the guaranteed payment received by petitioner in that year.
On Schedule E of their 1981 Federal income tax return,
petitioners reported, with respect to Securities, income in the
amount of $30,048. This income was composed of the $24,220
guaranteed payment and petitioner's distributive share of
partnership income.
In the explanation of adjustments attached to the notice of
deficiency, respondent used petitioners' partnership income/loss
(including guaranteed payments) as reported on their 1980 and
1981 returns to make the adjustments. Respondent did not make
any determinations or adjustments with regard to the guaranteed
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