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assumption of debt by a purchaser is includable in the amount
realized, respondent should have been on notice that the actual
amount realized might be equal to or greater than the debt of
Western, and, therefore, was understated by at least $41,993,939
in the calculation of the loss on the Federal income tax return.
Petitioner’s argument assumes that it is reasonable to
expect an agent for the Internal Revenue Service to sort through
12 unique and different partnership tax returns to find each
Schedule K-1 issued specifically for Western, and to tally all of
Western’s nonrecourse and other liabilities. Petitioner’s
argument then assumes that an agent should be able to compare the
amount of liabilities to the disclosed amount realized on the
Federal income tax return of Western, and glean from that
comparison that the amount realized is understated by the
difference between the total liabilities listed on the Schedules
K-1 and the amount reported on the return of Western.
Petitioner’s argument surpasses the bounds of reasonableness.
The purpose behind the adequate disclosure doctrine is to allow
the Commissioner an extra 3 years to assess a deficiency in
situations where a taxpayer’s failure to report income puts the
Commissioner at a special disadvantage in detecting errors. See
Colony, Inc. v. Commissioner, supra at 36. The omission in this
case created just that type of disadvantage. Presumably even the
sophisticated preparers of the returns, who were familiar with
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Last modified: May 25, 2011