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Petitioner did not maintain accurate accounting books and
records of the funds he received from sale of S-J partnership
interests.
On petitioner's individual 1976 Federal income tax return
that was filed untimely, petitioner did not report the above
$1,968,364 that he received from sale of S-J partnership
interests, and petitioner claimed ordinary losses of $9,499,701
relating to alleged investments in the S-J partnerships. During
the audit, petitioner did not cooperate with respondent's
examining agents.
In respondent's notice of deficiency for 1976, respondent
determined that petitioner, in 1976, received income of
$1,968,364 from sale of S-J partnership interests that was not
reported on petitioner's 1976 Federal income tax return.
Respondent also disallowed $9,269,756 of the claimed $9,499,701
in losses relating to the S-J partnerships primarily on the
ground that the alleged advanced royalties were not deductible.
Further, respondent determined that petitioner was liable for the
fraud addition to tax under section 6653(b).2
2 In respondent's motion for partial summary judgment,
respondent asserts that an additional $229,945 of the $9,499,701
claimed loss relating to the S-J partnerships should be
disallowed. Respondent apparently seeks to increase the tax
deficiency set forth in respondent's notice of deficiency to
reflect this additional loss disallowance. Respondent has not
raised this increased deficiency in the answer or by motion to
amend the pleadings, and we decline to allow respondent to raise
(continued...)
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