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Petitioners reported losses from the Partnership of $331,425 (32
percent of $1,035,702 total partnership loss) and $400,125 (32
percent of $1,250,391 total partnership loss) on their joint 1989
and 1990 returns, respectively, as nonpassive losses.
On September 8, 1994, respondent wrote a letter to
petitioners' representative admonishing petitioners to file
amended returns for 1989 and 1990 "to reflect the proper
treatment of the losses from * * * [the Partnership]" as passive,
or face the issuance of a notice of deficiency for those years.
The general 3-year period of limitations for making assessments
for 1989 and 1990, as extended by Form 872, Consent to Extend the
Time to Assess Tax, expired on June 30, 1995. No amended returns
were filed by, and respondent did not issue a deficiency notice
to, petitioners prior to that date.
On November 14, 1994, respondent issued a Notice of Final
Partnership Administrative Adjustment (FPAA) disallowing certain
deductions claimed by the Partnership for its taxable years 1987
through 1990. Blaine B. Quick, a partner other than the TMP,
petitioned this Court at docket No. 4745-95 on March 27, 1995.
On March 13, 1996, the Court entered a decision (Decision)
in docket No. 4745-95. The Decision sets forth adjustments to
certain partnership items which are favorable to respondent for
the years 1987 and 1988, and favorable to the Partnership for the
years 1989 and 1990. Specifically, the Decision adjusts losses
reported on line 21, Ordinary income (loss) from trade or
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