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did not always maintain a cash disbursements journal or a cash
receipts journal. Mr. Feldmann was never provided with a
complete listing of BBP’s assets and liabilities, and he never
prepared a balance sheet for the partnership.10 Neither the
partnership nor Mr. Feldmann prepared yearend trial balances.
Partnership capital accounts for BBP were never maintained. The
1993 and 1994 Forms 1065 reported that Melvin and Russell had
balances of “0" in their respective capital accounts at both the
beginning and the end of those taxable years.11 On the 1993 and
1994 Forms 1065, BBP reported on the Schedules L, Balance Sheet,
that the total assets and total liabilities of the partnership at
the beginning and the end of those taxable years were “None”.12
A calculation of each partner’s capital contributions to the
partnership cannot be made given the state of BBP’s records.
Additionally, a calculation of the distributions made to each
10In the mid-1980s, Mr. Feldmann recommended that BBP
maintain a balance sheet showing the partnership’s assets and
liabilities.
11For the taxable years 1980 through 1992, the areas
designated on the Forms 1065 and Schedules K-1, Partner’s Share
of Income, Credits, Deductions, Etc., attached to the Forms 1065
pertaining to information concerning Melvin’s and Russell’s
respective capital accounts were left blank. For the taxable
years 1993 and 1994, the Forms 1065 were also left blank;
however, the Schedules K-1 listed the amounts in Melvin’s and
Russell’s respective capital accounts at the beginning and end of
those taxable years as “0". Russell signed BBP’s partnership tax
returns for the years 1993 and 1994.
12For the taxable years 1980 through 1992, the Schedules L,
Balance Sheet, on BBP’s Forms 1065 were left blank.
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Last modified: May 25, 2011