- 14 -
To summarize, petitioners have failed to overcome their
initial reporting of $244,270 as gross receipts of their sole
proprietorship. Moreover, because petitioners also readily
concede that they have no substantiation for the identical amount
claimed as cost of goods sold, we sustain respondent’s
determination with respect to the adjustment to petitioners’
Schedule C income.
IV. Partnership Loss
As previously indicated, petitioners deducted on their 1993
return $19,791, representing their 50-percent share of a loss
allegedly incurred by Toro Leasing on a disposition of business
property. Respondent disallowed the claimed loss in the notice
of deficiency on the grounds that petitioners failed to
“establish that the amount shown was (a) a loss, and (b)
sustained by you”. Petitioners’ position on this issue is that
they “are entitled to rely on the K-1 from Toro Leasing, a
partnership, as adequate substantiation for the loss”.
Petitioners apparently believe that because Ms. Nierich did not
audit the partnership, the Schedule K-1 is not subject to
challenge. Existing caselaw, however, belies petitioners’
interpretation of the burden to be borne by taxpayers in this
situation.
The parties stipulated that “Toro Leasing is not governed by
the provisions in the Tax Equity and Fiscal Responsibility Act of
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011