Yung and Anita F. Chong - Page 10

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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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