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associated with the seven LKHP properties as allocated to both
the amended trust and Hillgren, as reported on their respective
Schedules K-1. The partnership also filed a statement with the
1997 return notifying the IRS that it intended to file an amended
return.
For 1997, LKHP filed an additional Form 1065 as an amended
return (1997 first amended return). The 1997 first amended
return made an election to adjust the basis in the LKHP
properties under section 754. The Schedule K and Schedules K-1
remained the same as in the original return.
Also for 1997, LKHP filed an additional Form 1065 as an
amended return (1997 second amended return). The 1997 second
amended return was filed to correct the allocation of partnership
income as 75 percent to the amended trust and 25 percent to
Hillgren. The Schedules K-1 for the amended trust, and for
Hillgren, were adjusted for this change, showing that the amended
trust held a 99.0027-percent capital interest and a 75-percent
profit interest and that Hillgren held a .9973-percent capital
interest and a 25-percent profit interest. As a result, the net
income from real estate and the depreciation on the Schedules K-1
were reallocated accordingly. The reported distribution of
$100,601 to the amended trust remained allocated to the amended
trust on the Schedule K-1.
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