- 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 ofPage: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Next
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