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to pay off the total obligation and that they would be ready to
go through with the transaction on December 4, 1978. Jack Ham
agreed to pay both principal plus accrued interest, which on
December 4, 1978, would total $38,334.50.
Henry Hooker (Hooker), an attorney, who also was a limited
partner in South Texas Drilling, was responsible for preparing
two separate assignments of partnership interest, one from
petitioner to Jack Ham, and the other from petitioner to Redi-
Built for purchase prices of $23,334.50 and $15,000,
respectively. The $38,334.50 total purchase price was paid with
two checks, each made payable to Commerce Bank for the above
stated amounts. Pursuant to the transfer, Jack Ham and Bert Ham
received an interest of 60.87 percent and 39.13 percent,
respectively of petitioner's 2.4 percent interest in South Texas
Drilling. Upon receiving the two checks, Commerce Bank used the
funds to retire petitioner's outstanding oil partnership debt.
On December 27, 1978, Jack Ham assigned his interest in
South Texas Drilling to Bert Ham for $334.50. Jack Ham had
previously told Harris that he would resell the oil partnership
interest to Bert Ham prior to the end of the year at a loss for
tax purposes.
Petitioners failed to report the receipt of the $38,334.50
in 1978 on their original Form 1040. On March 26, 1980,
petitioners filed an amended 1978 Federal income tax return, Form
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