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as to this house during 1986. However, on the 1986 return,
petitioners claimed a deduction for home mortgage interest of
$56,416 on Schedule A, Itemized Deductions.
Ms. Ford was a partner in at least one business venture.
She purchased an interest in the Courtyard by Marriott Ltd.
Partnership on August 1, 1986, for $200,000, comprising $30,400
in cash and a “limited partner note” of $169,600. The 1986
return listed a $17,163 loss which had been passed through to Ms.
Ford from her ownership interest in the Courtyard by Marriott
Limited Partnership.
OPINION
I. Net Capital Gains
We decide whether respondent arbitrarily or erroneously
determined that petitioners failed to recognize $2,341,878 in net
capital gains in 1986 attributable to more than $5 million of
capital gains for the year. Petitioners bear the burden of
proving that the amount set forth in the notice of deficiency is
arbitrary or erroneous; respondent is presumed correct once he
has put forth some probative evidence linking petitioners with
the income-producing activity. See Rule 142(a); Welch v.
Helvering, 290 U.S. 111 (1933); Weimerskirch v. Commissioner, 596
F.2d 358 (9th Cir. 1979), revg. 67 T.C. 672 (1977).4
4 Sec. 7491(a) was added to the Internal Revenue Code by the
Internal Revenue Service Restructuring and Reform Act of 1998,
(continued...)
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