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Petitioner was advised by his accountant that a partnership
return was unnecessary for the Oak Street properties.
Consequently, no partnership return was filed. Petitioner and
the Pughs reported the profits and losses relating to the Oak
Street properties on their own respective Federal income tax
returns.
Issue 1. Rental Real Estate Deductions
Respondent determined that petitioner could not deduct 50
percent of the rental real estate expenses for the Oak Street
properties and that, further, expenses claimed on petitioner's
return had not been substantiated. Petitioner argues that the
joint ownership and operation of the Oak Street properties
constituted a partnership for Federal income tax purposes, in
which he had a 50-percent interest. Accordingly, petitioner
claims that he is entitled to deduct 50 percent of the expenses
incurred for the Oak Street properties.
The principal issue for decision is whether petitioner may
deduct 50 percent of the rental real estate expenses. Subsumed
in this issue is the question of whether a partnership existed
between petitioner and the Pughs for Federal income tax purposes.
Petitioner bears the burden of proving, first, the existence of a
partnership, and second, his entitlement to the claimed amounts
of the rental real estate deductions. Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933).
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