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partner who put up a greater share of the capital than his share
of the partnership profits is to receive preferential
distributions to equalize capital accounts.”) (citing Otey v.
Commissioner, 70 T.C. 312, 321 (1978), affd. 634 F.2d 1046 (6th
Cir. 1980)), affd. 963 F.2d 218 (8th Cir. 1992).
Petitioner has not provided the strong proof necessary to
vary the form in which his transaction with the corporation was
cast. See Major v. Commissioner, supra. We therefore hold that
petitioner and the corporation formed a partnership.2
Issue 2. Whether Petitioner’s Gross Income Includes a
Distributive Share of PTSI’s Income
For its taxable year 2002, PTSI filed a Form 1065, U.S.
Return of Partnership Income, reporting income of $168,957. PTSI
prepared a Schedule K-1, Partner’s Share of Income, Credits,
Deductions, etc., reporting petitioner’s distributive share of
this income as $8,448. Petitioner did not report that amount on
his 2002 Federal income tax return. Respondent determined that
2 Secs. 6221 to 6234 were added by the Tax Equity and Fiscal
Responsibility Act (TEFRA) of 1982, Pub. L. 97-248, sec. 402(a)
96 Stat. 648, and provide for the determination of partnership
items at the partnership, rather than at the individual partner,
level. See Fargo v. Commissioner, T.C. Memo. 2004-13 n.1, affd.
447 F.3d 706 (9th Cir. 2006). In general, the TEFRA provisions
do not apply to partnerships having 10 or fewer members unless
the partnership otherwise elects. Sec. 6231(a)(1)(B). Because
the partnership in question had fewer than 10 members and there
is no indication it made such an election, the TEFRA provisions
do not apply.
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