William R. and Betty O. Bass - Page 11

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          Cal-Neva partnership does not constitute adequate disclosure.               
          Accepting his testimony and concluding that the correct amount of           
          the underpayment should have been calculated based on $13,150 in            
          disallowed losses rather than $14,783.69, the underpayment would            
          still be substantial for purposes of section 6661.                          
               Petitioners have made several arguments that we address                
          briefly.  First, in their answering brief, petitioners argue for            
          the first time that the notice in this case was sent after the              
          expiration of the period of limitations.  In this context,                  
          however, the period of limitations was suspended during the time            
          that the partnership action was pending and for 1 year                      
          thereafter.  Sec. 6229(d).  The decision in the partnership                 
          action did not become final until the expiration of the time for            
          filing a notice of appeal, which was 90 days after entry of the             
          decision.  Secs. 7481(a)(1), 7483.  Thus, the notice in this case           
          was sent approximately 3 weeks before the expiration of the                 
          period of limitations.                                                      
               Second, petitioners argue that the underpayment should be              
          further reduced by allowance of $5,000 as their out-of-pocket               
          expenses in relation to the Cal-Neva investment.  There is no               
          authority, however, that would allow them to deduct their out-of-           
          pocket amounts in the year of the investments.  See, e.g., Marine           
          v. Commissioner, 92 T.C. 958, 974-980 (1989), affd. without                 

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