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contends that because the note was nonrecourse and the Burke
Property could be exchanged by petitioner under section 1031
without repaying the note, petitioner's liability on the note was
uncertain. We find respondent's logic less than compelling.
Even assuming that petitioner could have exchanged the Burke
Property without repaying the McMahon Note, an exchange partner
would reduce his valuation of the Burke Property according to the
note's balance. And, consequently, petitioner would receive less
in the exchange. In economic terms, petitioner's burden was
certain.
As for petitioner's other deductions from the loss years,
petitioner has introduced only its unaudited books of original
entry and other accounting records based upon them. While we
believe that petitioner's witnesses testified truthfully and that
petitioner's management was not dishonest, its books are
unreliable. Petitioner cannot substantiate all of its deductions
for the current years in issue, years in which it supposedly kept
its underlying documentation. For example, petitioner's mileage
logs for the Malibu contained miles allocable to the Cougar.
Petitioner included part of the fees paid to Charles for
investigating prospective exchange properties under "professional
services" rather than "fees". Petitioner's books standing alone
fail to prove that petitioner incurred the other deductions from
the loss years.
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