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On Form 4605-A, the examiner made examination changes to
SGE’s 1985 partnership tax return as follows: (1) An adjustment
reducing the partnership’s ordinary loss of $952,586 to zero; and
(2) an adjustment reducing the cost or other basis of qualified
investment property from $6,246,500 to zero.
On May 2, 1989, the same examiner signed Form 4665 and Form
4605-A for SGE’s 1986 tax year. The Report Transmittal for the
1986 tax year was essentially identical in all material respects
to the report completed for the previous year.
On Form 4605-A, the examiner made examination changes to
SGE’s 1986 partnership tax return as follows: (1) An adjustment
reducing the partnership’s ordinary loss of $1,856,560 to zero;
and (2) an adjustment reducing payments to individual retirement
accounts (IRA) and Keogh accounts totaling $60,000 to zero.
On June 13, 1989, respondent issued an FPAA to petitioner
and Jay Hoyt, as TMP of SGE, relating to the partnership return
filed for the 1985 tax year. In the Explanation of Adjustments
included with the FPAA, respondent adjusted the 1985 claimed
partnership expenses totaling $962,586 to zero and adjusted the
value of the qualified investment property claimed from
$6,246,500 to zero. The explanation listed 12 reasons why SGE
was “entitled to no items of ordinary loss, deduction, credit, or
other items of tax benefit.” Further, the explanation stated
that the partners of SGE were not entitled to their distributive
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