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50-percent distributive shares of income from BBP in 1994 from
the sale of grain. Alternatively, respondent contends that the
grain sold in 1994 was owned solely by Russell, and, thus, he had
additional gross income of $751,988 in 1994. Respondent also
argues that, to the extent the distribution of grain sales
proceeds and other money to Russell exceeded his adjusted basis
in BBP, Russell had gain on the distribution pursuant to section
731(a). Finally, respondent contends that Russell and Clarice
are liable for the accuracy-related penalties for 1994 and 1995
with respect to the grain sales income item and certain erroneous
deduction items.
Russell contends that he is responsible for only 50 percent
of the income tax on the grain sales income for 1994 because he
and Melvin agreed to share equally all the income and expenses of
BBP. Russell relies on the fact that tax returns filed by BBP
for the taxable years 1980 through 1994 show that all the income
and expenses were shared equally by the partners for income tax
purposes. Russell also contends that he possessed sufficient
basis to withdraw the cash from the grain sales without incurring
any additional tax liability. Finally, Russell and Clarice claim
that they are not liable for the accuracy-related penalties for
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