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under chapter 7 on November 20, 1991. Petitioner’s bankruptcy
case closed in August 1993.
6. GSD’s Final Partnership Return
GSD reported that interest accrued on the Sunbelt loan from
its initial return in 1984 until its final return for 1991. GSD
reported assets, loan balances, and accrued interest on its 1988,
1989, 1990, and 1991 Forms 1065, U.S. Partnership Return of
Income, as follows:
End of year End of year
Year Assets loan balance accrued interest
1987 $65,156,718 $77,978,575 $11,276,795
1988 1,474 27,742,833 2,523,458
1989 1 27,742,833 5,297,741
1990 1 27,742,833 8,072,024
1991 1 27,742,833 9,531,373
GSD accrued interest expense on the Sunbelt note of
$1,459,349 for 1991 from January 1 to July 11, 1991.
On July 15, 1992, GSD filed a Form 1065 for the period from
January 1 to July 11, 1991, which it designated as its final
return. Petitioner signed GSD’s return for 1991 in his capacity
as general partner. GSD deducted interest expense of $1,459,349
on its 1991 return (GSD’s 1991 accrued interest deduction). The
interest deduction created a $1,459,349 loss (the 1991 loss)
because GSD reported no income. The Schedules K-1, Partner’s
1(...continued)
bankruptcy * * * a successor General Partner is elected
by a majority in interest, and not in numbers of the
remaining Partners;.
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