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estate argues that a "50-50 income allocation is consistent
with the requirements of the Internal Revenue Code under
all of the undisputed facts and circumstances of this
case." We consider the facts and circumstances the estate
relies on.
First, the estate argues that the partnership income
for the years in issue did not inure to the benefit of
James. According to the estate, this is shown by the fact
that the asset value of the partnership was not increased
by the amount of income reported by the partnership, and by
the fact that any distribution to James upon liquidation of
the partnership would be minimal. Second, the estate
argues that respondent "is improperly attempting to use a
state court decision rendered in 1997 with respect to an
accounting * * * to retrospectively reallocate income for
federal income tax purposes for the calendar years 1990
through 1993."
Contrary to the estate's argument, the net asset value
of the partnership increased each year by the amount of
partnership income. In the following schedule, we have
computed the net asset value of the partnership using the
balance sheets filed with the partnership returns as
Schedule L, and we have compared the annual increases in
net asset value to the income reported:
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