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partnerships for both of the years in issue, showed a
negative capital account. Petitioners argue as follows:
That was a mistake. The capital account on these
K-1's did not purport to show basis; it only
showed the net of the partner's contributions
less withdrawals plus his share of income, less
his share of losses. It did not take into
account his share of recourse liabilities. There
is another place on the K-1 form to show the
partner's share of liabilities, both recourse and
nonrecourse. In most cases, that information was
simply not shown on the K-1. The regulations
provide that, under certain circumstances, a
partnership could elect not to include that
information on the K-1 and in many cases the
partnership made that election. In other cases,
the amount shown as "at risk" was simply
incorrect.
Petitioner's testimony made it clear that
he had sufficient basis in each partnership to
justify the full amount of loss claimed. The
testimony was unchallenged.
Petitioners also argue as follows:
Petitioner's testimony makes it very clear,
however, that the capital accounts as shown on
the K-1s were not his basis in his partnership
interest. In all cases, Lemons was liable for
his share of recourse liabilities and the amount
of that liability was not included in the capital
account figure shown on the K-1. When his
capital account, whether it be positive or
negative, is added to his share of recourse
partnership liabilities, Lemons had more than
enough basis to utilize the full amount of the
loss shown on the K-1.
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