- 15 - 1982 (TEFRA) embodied in subchapter C of chapter 63 of the Internal Revenue Code.” Toro Leasing falls within the “small partnership” exception contained in section 6231(a)(1)(B)(i) and thus is not under the purview of the unified partnership-level audit procedures implemented by TEFRA. In such circumstances, respondent has no obligation to conduct an audit of the partnership and, as the following cases illustrate, may demand that the individual taxpayer substantiate specific facts underlying items allegedly derived from partnership activities. For example, in Johnson v. Commissioner, T.C. Memo. 1999- 412, the taxpayers claimed partnership losses. After expressly assuming that the partnerships at issue were small partnerships within the meaning of section 6231(a)(1), we reasoned: Section 6001 requires that a taxpayer liable for any tax shall maintain such records, render such statements, make such returns, and comply with such regulations as the Secretary may from time to time prescribe. To be entitled to a deduction, therefore, a taxpayer is required to substantiate the deduction through the maintenance of books and records. Petitioner has not established that the entities in question incurred a loss in 1992, or any other year. At most, petitioner has established that the partnership entities defaulted on the debt in the amount of $2,590,001 in 1992. Even if petitioner had established that the partnerships had incurred a loss, petitioner would not be entitled to a flow-through loss deduction as petitioner has not established his bases in his partnership interests. [Id.]Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Next
Last modified: May 25, 2011