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statements does not mention that any transfers had been made from
PK Ventures to PKVI LP during 1992.
h. 1993
PKVI LP’s reviewed financial statements for the year ended
December 31, 1993, indicate that PKVI LP received transfers from
PK Ventures totaling $242,073 during 1993. Note 4 to PKVI LP’s
reviewed financial statements for the year ended December 31,
1993, stated: “At December 31, 1993, the Partnership owed one
limited partner $577,521 in the form of demand notes at interest
rates ranging from 8% to 9%. Interest of $31,201 and $10,645 was
incurred but not paid during 1993 and 1992, respectively.” On
the Balance Sheets included in these financial statements,
$577,521 for “Notes payable to limited partner” was listed as a
current liability.
On the Consolidating Balance Sheet included in PKV&S’s
audited consolidated financial statements for the year ended
December 31, 1993, there were no amounts listed as “Due from
affiliated partnership” or as “Investments in limited
partnerships” with respect to PK Ventures.
2. IRS Determinations
The IRS determined that PKV&S should not have imputed
$67,772 of interest income from PKVI LP on its consolidated
income tax return for 1990 or $100,661 of interest income from
PKVI LP on its consolidated income tax return for 1991 because
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