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Korchak’s Madison Recycling investment. Instead, he utilized a
cash management account (cash management account) that he used to
purchase all of the investments that he made.8
Petitioner became aware of Mr. Korchak’s Madison Recycling
investment on February 2, 1986, when she and Mr. Korchak signed
Form 872, Consent to Extend the Time to Assess Tax (Form 872),
with respect to their taxable year 1982. That form stated in
pertinent part:
The amount of any deficiency assessment is to be
limited to that resulting from any adjustment to:
(A) the taxpayer’s distributive share of any item of
income, gain, loss, deduction, or credit of, or distri-
bution from Madison Recycling, (B) the tax basis of the
taxpayer’s interest(s) in the aforementioned partner-
ship(s) or organization(s) treated by the taxpayer(s)
as a partnership, (C) any gain or loss (or the charac-
ter or timing thereof) realized upon the sale or ex-
change, abandonment, or other disposition of taxpayer’s
interest in such partnership(s) or organization(s)
treated by the taxpayer as a partnership, (D) items
affected by continuing tax effects caused by adjust-
ments to any prior tax return, and (E) any consequen-
tial changes to other items based on such adjustment.
In 1986, without consulting petitioner, Mr. Korchak pur-
chased a majority interest in Riverside Polymer Systems, Inc.
(Riverside), and ultimately invested approximately $700,000 in
that company. In 1989, Riverside filed for bankruptcy. As a
result of that bankruptcy proceeding, Mr. Korchak lost his entire
8It is not clear from the record whether the cash management
account was held (1) at a bank or another type of financial
institution and (2) in the joint names of petitioner and Mr.
Korchak.
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