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hereinafter sometimes referred to collectively as the Partnership
Interests. Parker paid the entire $35,000 to petitioner in 1996.
Petitioner filed timely 1995 and 1996 tax returns. He used
the cash basis accounting method for his Schedule C (Profit or
Loss From Business) real estate activities. Petitioner did not
report the income from the sale of the Corporations on either of
those tax returns.4
Centurion Investments’ 1995 tax return shows petitioner as
its tax matters person and sole shareholder; its 1996 tax return
shows Parker as its tax matters person and sole shareholder.5
4 It does not appear that petitioner reported on his 1996
tax return the $35,000 that he received from the sale of the
Partnership Interests to Centurion Investments or Parker. In the
notice of deficiency, respondent determined that petitioner
realized a long-term capital gain of $823,016 on his sale of the
Spanish Trace Associates and Williamsburg Manor Associates
partnership interests. The record does not indicate how
respondent determined the amount of this adjustment, or how
respondent treated the gain or loss realized on the sale of the
Meadow Green Associates and Crystal Tower Associates partnership
interests. Nevertheless, respondent conceded this adjustment in
full. It is unclear whether the parties dealt with the $35,000
elsewhere, and if so, then how they dealt with it.
Our findings as to the Partnership Interests are prompted by
the later combining of the Partnership Interests sale and the
Corporations sale in the consent decree and in the promissory
note, discussed, infra.
5 A tax matters person served a role under the so-called
partnership audit procedures made applicable to subch. S
corporations by sec. 4 of the Subchapter S Revision Act of 1982,
Pub. L. 97-354, 96 Stat. 1669, 1691, 1697, effective for taxable
years beginning after Dec. 31, 1982. This was repealed by sec.
1307(c)(1) of the Small Business Job Protection Act of 1996, Pub.
L. 104-188, 110 Stat. 1755, 1781, 1787, effective for taxable
(continued...)
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