Curtis R. and Lynn Bitker - Page 5

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          partnership.  All four petitioners are personally liable for the            
          Bitker partnership’s debts.                                                 
               Mr. Mostoller prepared and maintained a depreciation schedule          
          showing the historical cost of equipment, less depreciation taken           
          each year.  He verified loan balances by calling the Farm Credit            
          Service.  Mr. Mostoller calculated the Bitker partnership’s capital         
          by subtracting the loan balances from the total adjusted cost bases         
          of partnership assets (cost basis less depreciation).  Mr.                  
          Mostoller determined the partners’ capital contributions and                
          distributions by taking each partner’s beginning capital account,           
          adding thereto (or subtracting therefrom) the partner’s                     
          distributive share of the Bitker partnership’s net income (or net           
          loss) for the year, and subtracting the partner’s ending capital            
          account--the difference being the amount of the distribution to, or         
          the amount of the contribution by, the partner to the Bitker                
          partnership for the particular year.                                        
               On Schedules K-1 attached to Forms 1065 filed by the Bitker            
          partnership for years prior to 1991, the amounts for “Partner’s             
          share of liabilities” and “Analysis of partner’s capital account”           
          were left blank.  Schedules K-1 attached to the Forms 1065 filed by         
          the Bitker partnership for years 1991-97 (the 1991-97 Schedules K-          
          1) reflect that each petitioner husband owned 30 percent of its             
          capital and that each was entitled to 30 percent of its profits and         
          losses.  The 1991-97 Schedules K-1 reflect that each petitioner             






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