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Income and Loss. She attached the Schedule E to her Form 1040,
U.S. Individual Income Tax Return.
Subsequent examination of the water company’s Form 1120S
resulted in adjustments of $13,287 and $1,157 to “Legal &
professional fees” and “Depreciation”, respectively. This total
adjustment of $14,444 reduced the water company’s reported
ordinary loss of $16,211.26 to $1,767. The water company
accepted these figures. Petitioner’s pro rata share of the
corrected ordinary loss was determined to be $177 on Form 886-X,
Small Business Corporation Shareholder’s Shares of Income.
$1,444 is 10 percent of the $14,444 adjustment. Petitioner
claimed a loss of $1,621 on her return. As a result of the
corporate adjustment, the $1,621 was reduced by $1,444, resulting
in a $177 corrected loss. The reduction to petitioner’s pro rata
share of the water company’s corrected ordinary loss gave rise to
the deficiency in issue. The notice of deficiency mentioned
under the heading “remarks” two losses totaling $20,762. In her
petition, petitioner questioned the manner in which the water
company accounted for the two loans noted in the notice of
deficiency.
In general, the Commissioner’s determinations are presumed
correct, and the taxpayer bears the burden of proving otherwise.
Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). No
question has been raised with respect to the burden of proof
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Last modified: May 25, 2011