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income among the partners in proportion to their contributions to
the partnership under the bankruptcy plan. The total
contribution by all partners was $38,962,594. Petitioner’s
second COD income allocation of $10,233 was calculated by
dividing his $15,000 contribution by the total of all partner
contributions, $38,962,594, and then multiplying the result by
the remaining COD income, $26,580,484 (15,000/38,962,594 = .03849
percent x $26,580,484).4
In order to explain fully the two-step process, respondent
attached to his response to petitioners’ objection to his
computation a spreadsheet titled “IRS Closing Agreement” that
reflects the computation of the COD income allocation to
petitioner using the two-step process described above. Neither
party introduced the closing agreement or the spreadsheet into
evidence during the trial of the case.
The following adjustments (the adjustment items) to
petitioners’ income listed on respondent’s Form 4549A-CG, Income
Tax Examination Changes, reduce petitioners’ taxable income by
$1,199: (1) Capital loss of $18, (2) Finley Kumble interest
4The computation shows the second allocation amount is
$10,231, which is $2 less than the $10,233 allocation claimed by
respondent. The discrepancy could be caused by mistakes in
amounts recited in respondent’s response. This computational
discrepancy is minimal and harmless and does not change our
decision.
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Last modified: May 25, 2011