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Sheridan property and the purchase of the Montrose and Pratt
properties. Mr. Mader prepared the Schedules K-1, Partner’s
Share of Income, Credits, Deductions, Etc., reflecting each
partner’s distributive share of that gain. Petitioner’s Schedule
K-1 reflected a gain in the amount of $61,983.
Petitioner did not report the $61,983 on her Federal income
tax return for 1993. Respondent determined, inter alia, that
petitioner should have reported the $61,983 as a capital gain
pursuant to section 61(a)(13).
Section 702(c) provides that in any case where it is
necessary to determine the gross income of a partner for purposes
of this title, such amount shall include his distributive share
of the gross income of the partnership. Petitioner states that
she did not receive a cash distribution but that is irrelevant
under the statute. Each partner is taxable upon his or her
distributive share of the partnership profits, whether or not
distributed. Sec. 702; sec. 1.702-1(a), Income Tax Regs. Or to
put it another way, a partner is taxable on his or her
distributive or proportionate shares of partnership income,
irrespective of whether that income is actually distributed to
him or her. United States v. Basye, 410 U.S. 441, 447-8, 454
(1973); Cipparone v. Commissioner, T.C. Memo. 1985-234. In the
instant case, it appears that the Partnership reinvested
petitioner’s share of the gain.
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Last modified: May 25, 2011