Dennis E. Runkle and Debra A. Runkle - Page 8

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          general partner and a 4.5-percent interest as limited partner.              
          Petitioners’ children, Daniel J. Runkle, Dustin S. Runkle, and              
          Dawn A. Runkle, each held 29-percent interests as limited                   
          partners in the Elknur Family Limited Partnership from its                  
          formation through at least December 31, 1995.                               
               Petitioners transferred title to their personal residence to           
          the Elknur Family Limited Partnership by quitclaim deed, dated              
          October 18, 1994, in accordance with their partnership agreement.           
          Petitioners received no consideration in exchange for their                 
          transfer of their personal residence to the Elknur Family Limited           
          Partnership.  The quitclaim deed referenced the consideration as            
          “one dollar and other valuable consideration.”  Moreover, despite           
          their contribution to the partnership, petitioners remained                 
          obligated to pay the outstanding obligations on the residence.              
               Petitioners opened a business checking account for the                 
          Elknur Family Limited Partnership on September 14, 1994, and Mr.            
          Runkle deposited insurance commission checks into the business              
          checking account for the Elknur Family Limited Partnership during           
          1994 and 1995.  Petitioners used the partnership’s checking                 
          account to pay personal expenses, including doctor bills and loan           
          payments.  Petitioners caused the Elknur Family Limited                     
          Partnership to file Form 1065, U.S. Partnership Return of Income,           
          for 1994 and every year thereafter.                                         







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