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information that he was receiving from respondent. Petitioner
interpreted the letters that he was receiving from respondent to
mean that respondent was “claiming that we’re not running a
legitimate business and that they are going to disallow any
deductions or credits that we had claimed.”
On April 22, 1992, after the year in issue but before filing
his return for that year, petitioner signed a series of documents
evidencing petitioner’s intention to invest in the partnership
SGE 84-2.
Petitioner filed an individual Federal income tax return for
his taxable year 1991, the year in issue. He reported the
following on this return:
Wage income $48,405
Interest income 4,512
SGE 84-2 loss (39,160)
DSBS 87-C loss (16,720)
Capital gain 13,003
Farm income 4,824
IRA contribution deduction (2,000)
Adjusted gross income 12,864
Tax liability 724
The losses from SGE 84-2 and DSBS 87-C were reported on Schedules
K-1, Partner’s Share of Income, Credits, Deductions, Etc., issued
to petitioner by the partnerships for the partnerships’ taxable
years ending in 1991. Both the capital gain and the IRA
contribution deduction reported on petitioner’s return are
derived from SGE 84-2. Although it appears from the return that
the farm income is related to petitioner’s Hoyt investment, it is
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