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amount of $193,017 from PK Ventures I Limited Partnership
(1992)”.
C. IRS Determinations
The IRS determined that the Roses could deduct their
distributive share of PKVI LP’s losses for 1990, 1991, 1992,
1993, 1994, and 1995 to the extent of the basis in their PKVI LP
interest. Before taking into account any of PKVI LP’s losses,
the IRS determined that the Roses’ basis in their PKVI LP
interest was $667,056 as of December 31, 1990. The IRS
determined this amount by subtracting the amount of PKVI LP’s
losses that the Roses deducted in 1988 and 1989 from the amount
of constructive dividends that it determined that the Roses
recognized as a result of the transfers from PK Ventures, TBPC,
and TPTC to PKVI LP prior to 1991. The IRS included a note
stating that this basis computation “will need to be adjusted if
the level of constructive dividends shown in Adjustment H are
[sic] changed.” The IRS allowed as a deduction against this
basis (1) a $103,820 loss carryover from PKVI LP’s 1988
partnership year; (2) a $318,788 loss carryover from PKVI LP’s
1989 partnership year; and (3) $244,468 of the Roses’
distributive share of PKVI LP’s losses for 1990. Accordingly,
the IRS decreased the Roses’ taxable income by $667,056 for 1990.
Before taking into account any of PKVI LP’s losses, the IRS
determined that the Roses’ basis in their PKVI LP interest was
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