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before June 30, 2005. The Forms 872 did not reference
partnership items.
Notice of Deficiency
Respondent issued to petitioners a notice of deficiency for
the taxable year 1995 dated April 26, 2005. The total amount of
the deficiency was $2,726,742. Respondent also determined a
penalty of $545,348 under section 6662(a). In his notice of
deficiency, respondent listed the following Schedule E
adjustments:
Family Affordable Partners, Inc. $3,468,019
North American Sports Mgmt., Inc. 3,468,019
Respondent provided the same explanation for both adjustments,
except that one referred to FAP and the other to NASP:
Since it has not been established that Pascal and
Company incurred a deductible $6,936,038.00 loss in
1995, nor has it been established that any loss
attributable to Pascal and Company is allowable to UK
Lotto, LLC * * * or not limited, nor has it been
established that any loss attributable to Pascal and
Company is allowable to * * * [Name of S Corporation],
or not limited, nor has it been established that any
loss attributable to Pascal and Company is allowable to
you, or not limited, your $3,468,019.00 distributive
loss in 1995 from * * * [Name of S Corporation], that
represents 50% of the claimed $6,936,038.00 loss by UK
Lotto, LLC, * * * from Pascal and Company, is
disallowed, and your taxable income is increased by
3,468,019.00 for 1995.
In their Statement 15 accompanying Schedule E, petitioners
did not list any specific item of loss that corresponded with the
$3,468,019 that respondent disallowed.
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