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III. Distributions in Excess of Basis
Respondent argues that, to the extent that the grain sales
proceeds and other money Russell received from BBP in 1994
exceeded his adjusted basis in the partnership, Russell had
additional taxable income. Russell maintains that he possessed
sufficient basis to withdraw the cash from the grain sales
without incurring any additional tax liability.
As a preliminary matter, we must determine which party bears
the burden of proof on this issue. Russell argues that the
notice of deficiency containing the adjustment for grain income
did not raise the issue of withdrawal in excess of basis as a
theory for increasing Russell’s gross income by $751,988.
Russell maintains that this alternate theory was not tried by the
implied consent of the parties. In the event the issue was tried
by the implied consent of the parties, Russell contends that
resolution of the issue requires the presentation of evidence
that is different from that which would be necessary to resolve
the proper reporting of grain sales income as between the estate
and Russell.
Respondent recognizes that this issue was not expressly
raised in the notice of deficiency. On brief, respondent states:
Although not expressly set forth in the notice of
deficiency, this argument is an additional ground for
the $751,988.29 adjustment to Russell Ballantyne’s
taxable income in 1994. It was addressed by both
respondent and Russell Ballantyne in the parties’ trial
memoranda and evidence applicable to the argument was
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