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Partnership Year
1989 1990
Gross receipts $138,756 $282,168
Ordinary losses (104,347) (169,491)
Petitioners untimely filed their 1989, 1990, and 1991 joint
Federal income tax returns, to which returns petitioners attached
Schedule E, Supplemental Income and Loss, relating to petitioner's
interest in the partnership that owned and operated Stores 4, 5,
and 7, and reflecting petitioner's one-half interest in the
partnership ordinary losses as claimed on the partnership returns.
On petitioners' 1990 and 1991 joint Federal income tax
returns, petitioners attached Schedule C, Profit or Loss From
Business, relating to Store 6 that petitioner owned individually
and reporting gross income relating to Store 6 of $47,029 for 1990
and $281,740 for 1991.
On audit, using the bank deposits method of proof,
respondent treated the funds that were deposited into the bank
accounts of the Stores -- the source of which respondent regarded
as unexplained -- as taxable income to the partnership or to
petitioners. Respondent also treated certain funds received for
leasehold improvements (discussed below) as specific items of
taxable income, and respondent treated certain other funds that
were deposited into the bank accounts maintained for the Stores
as nontaxable deposits.
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Last modified: May 25, 2011