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is not pleaded, it is deemed waived). We conclude therefore that
petitioners are not bound by the duty of consistency to the capital
accounts and distributions reported on the 1991 tax return.
The Bitker partnership was formed in 1979. The records of the
partnership do not show the amounts of cash contributions or the
bases in property contributed by petitioner husbands and their
father, Ray Bitker, to the partnership when it was formed.
Moreover, a calculation of the distributions made to each partner
each year since its formation cannot be made. The partnership tax
returns in the record cover only the years 1984-97. Only the tax
returns for 1992-97 show balance sheets. Under these
circumstances, it is appropriate to apply the alternative rule set
forth in section 1.705-1(b), Income Tax Regs., in order to
establish petitioners’ adjusted bases in their partnership
interests.
Regardless of where the burden of proof may lie, the
preponderance of the evidence establishes that the distributions
petitioners received in 1996 and 1997 did not exceed their bases in
their partnership interests.
The parties agree that the Bitker partnership had the
following assets and liabilities as of December 31, 1995-97:
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