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respondent, then petitioner should “consider having an
independent accountant or attorney review this matter”.
On March 6, 1992, respondent sent to petitioner a letter
which again informed petitioner that Durham was under examination
for the 1989 taxable year. The letter further stated that “any
adjustments proposed to this entity could have a tax effect to
your return”.
On May 15, 1992, petitioner filed his 1991 Federal income
tax return and reported business income and income on Schedule F,
Profit or Loss From Farming, of $54,347 and $51,657,
respectively. Durham issued petitioner a Schedule K-1 for the
period ending September 30, 1991, which reported $94,050 as
petitioner’s distributive share of the ordinary loss from Durham.
Attached to the Schedule K-1 was a Form 8271 which identified
Durham as a tax shelter. On a Schedule E attached to the 1991
return, petitioner reported a partnership loss of $94,050.
Petitioner also claimed an individual retirement account
deduction of $2,000 on his 1991 return which was related to his
Hoyt investment.
On May 1, 1995, respondent issued a notice of final
partnership administrative adjustment (FPAA) to the tax matters
partner, as well as to petitioner, with respect to Durham’s 1991
taxable year. The FPAA determined that Durham had failed to
substantiate many of its claimed deductions. These deductions
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