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return, petitioner represented that the ranch was a partnership
asset, that petitioner was a partner in the partnership, and that
the sale of the ranch had been reported correctly on the
partnership return. Relying on petitioner's representations and
on the previously filed partnership returns, respondent did not
make any adjustments to the partnership's return.
Respondent also audited petitioners' Federal income tax
return for 1988. Upon completion of the audit, respondent issued
a notice of deficiency in which respondent disregarded the
alleged transfer of petitioner’s partnership interest to the P.C.
and determined that petitioner was a partner when the ranch was
sold in 1988, that petitioner was required to report his
distributive share of partnership income for 1988, and that
petitioners were liable for additions to tax under section 6653
and section 6661.
OPINION
Petitioners make two arguments in an effort to avoid
reporting and paying income tax on petitioner’s 1988 distributive
share of partnership income. First, petitioners argue that,
although the partnership operated the ranch from 1982 to 1988,
6(...continued)
several years earlier. Petitioner participated in the audit but
did not inform the auditing agent that the ranch was titled in
the name of the individuals and not in the partnership's name.
Petitioner explained this failure by claiming that he did not
know title was held in the names of the individuals until 1998.
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