11
Handler’s claim that he was not a partner in W&R during 1996 is a
partnership item because it could affect the allocation of
partnership items to the other partners. Blonien v.
Commissioner, 118 T.C. 541, 551 (2002).
Petitioner bears the burden of establishing that payments in
liquidation of the withdrawing partners’ interest in W&R were
paid or incurred in 1996 which resulted in deductible guaranteed
payments. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115
(1933); I-Tech R&D Ltd. Pship. v. Commissioner, T.C. Memo. 2001-
10, affd. sub nom. Lewin v. Commissioner, 335 F.3d 345 (4th Cir.
2003).7 The burden of proof, or the effect of failure of proof,
does not change because the case is submitted under Rule 122.
See Rule 122(b); Borchers v. Commissioner, 95 T.C. 82, 91 (1990),
affd. 943 F.2d 22 (8th Cir. 1991).
Petitioner claims the allocation of income to zero out the
negative capital accounts of the withdrawing partners resulted in
guaranteed payments which are deductible by the partnership
pursuant to section 736(a)(2). Respondent claims that the
allocation of income could not result in guaranteed payments
because there was no proof that payment had been incurred or paid
in 1996, or that, if payments had been incurred or paid, they
were deductible as ordinary or necessary expenses pursuant to
7 Petitioner and Handler do not argue that sec. 7491(a)
applies to shift the burden of proof to respondent.
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