- 2 -
164(a)(1), I.R.C., and therefore must be deducted
rather than used to offset the amount realized on the
disposition of real property. Waxenberg v.
Commissioner, 62 T.C. 594 (1974) and Rev. Rul. 80-121,
1980-1 C.B. 43, applied; Rev. Rul. 73-600, 1973-2 C.B.
47, distinguished.
2. Held, further, rollback taxes and attorney's
fees related to the determination of such taxes are
incurred "in connection with" property from which
portfolio income is derived, and are therefore expenses
allocable to portfolio income. Sec.
469(e)(1)(A)(i)(II), I.R.C.; sec. 1.469-2T(d)(4),
Temporary Income Tax Regs., 53 Fed. Reg. 5716 (Feb. 25,
1988).
J. Steve Anderson III (tax matters partner), pro se.
Gary L. Bloom, for respondent.
MEMORANDUM OPINION
NIMS, Judge: By Notice of Final Partnership Administrative
Adjustment (FPAA) dated March 1, 1995, respondent determined
adjustments to partnership items for the 1990 taxable year of
Sandy Lake Road Limited Partnership (SLR) as follows:
Partnership Items As Reported As Adjusted
Farm loss ($4,807) - 0 -
Net long-term
capital gain 874,992 $1,217,754
Other deductions
(Sch. K, line 11) (422,410) - 0 -
Portfolio deductions - 0 - 427,217
Net earnings (loss)
self employment (2,429) - 0 -
All section references, except where otherwise specified,
are to sections of the Internal Revenue Code in effect for the
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