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A substantial portion of the partnership assets (the two
houses and the ranch) was used for personal purposes before and
after petitioners formed the partnership. Petitioners’ children
did not sign a lease or pay rent to the partnership in exchange
for living at 6219 Dilbeck and 14827 Chancey. Petitioners’
children paid the utilities while they lived at 6219 Dilbeck and
14827 Chancey. The partnership paid the utilities at 14827
Chancey while Mary Knight was absent from November 1995 to
September 1997. Petitioners paid real property taxes for 1994
for the ranch, 6219 Dilbeck, and 14827 Chancey, and the
partnership paid them thereafter. Petitioners paid property
insurance premiums for 1994 for 6219 Dilbeck and 14827 Chancey,
and the partnership paid them thereafter. The expenses of 6219
Dilbeck and 14827 Chancey were more than 70 percent of the
partnership’s annual expenses.
Petitioner continued to operate the ranch after he
contributed it to the partnership. He paid no rent to the
partnership until December 1998, after the petitions in these
cases were filed. The parties stipulated that, in December 1998,
petitioner entered into an oral pasture lease on the ranch
between himself as an individual and himself as trustee. On
December 31, 1998, petitioner paid $1,500 to the partnership as
rent under the oral pasture lease.
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