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of $3,313,241 for the 1994 taxable year. Of these amounts,
$723,240 consists of claimed losses related to petitioner's
interests in two subchapter C corporations. We shall decide
whether petitioners are entitled to a partnership loss carryover
in the amount of $2,590,001 in 1994.
Section 6001 requires that a taxpayer liable for any tax
shall maintain such records, render such statements, make such
returns, and comply with such regulations as the Secretary may
from time to time prescribe. To be entitled to a deduction,
therefore, a taxpayer is required to substantiate the deduction
through the maintenance of books and records.
Petitioner has not established that the entities in question
incurred a loss in 1992, or any other year. At most, petitioner
has established that the partnership entities defaulted on the
debt in the amount of $2,590,001 in 1992. Even if petitioner had
established that the partnerships had incurred a loss, petitioner
would not be entitled to a flow-through loss deduction as
petitioner has not established his bases in his partnership
interests.
The determination of a partner’s basis in his or her
partnership interest must be made before a partner can deduct his
or her share of partnership losses because losses cannot reduce a
partner’s basis below zero. See sec. 704(d); Sennett v.
Commissioner, 80 T.C. 825, 829 (1983), affd. 752 F.2d 428 (9th
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