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leads us to find that the partnership has not proven its actual
losses for the 1998 tax year.
D. How much of a loss, if any, can Yung claim?
Even if we could determine the partnership’s total losses,
Yung would still only be able to claim his share of such losses
to the extent of his adjusted basis. Sec. 704(d); Sennett v.
Commissioner, 80 T.C. 825 (1983), affd. 752 F.2d 428 (9th Cir.
1985). Adjusted basis is essentially the partner’s contribution
to the partnership increased by his distributive share of
partnership income and decreased by cash distributions and his
share of partnership losses. Sec. 705(a). A partner’s
distributive share of income or losses automatically flows
through to him. See sec. 702(a); sec. 1.702-1(a), Income Tax
Regs. But his adjusted basis can’t go below zero; if his
distributive share of partnership losses is greater than his
available adjusted basis, the excess loss can’t be claimed in
that year but must instead be carried forward until he once again
has adjusted basis available to offset the loss. See sec. 1.704-
1(d)(1), Income Tax Regs.
To determine Yung’s adjusted basis in the Chong brothers’
partnership at the end of 1998, we must know how much he
contributed to the partnership and his annual distributive share
of partnership income and/or losses since the partnership began.
Both Yung and Lok credibly testified that there had never been a
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