-122-
Partnership in exchange for a promissory note of $2,000. Exh.
915.
(v). FPC Subventure’s Tax Returns
During the years at issue, Kanter and Lisle reported their
distributive shares of FPC Subventure’s partnership items of
income, loss, deduction, and credit.59 Exhs. 125-134 (Kanter);
59 On June 13, 1994, at the start of the trial in these
cases, respondent filed an amendment to answer seeking increased
deficiencies and additions to tax for fraud. Included in
respondent’s amendment to answer were allegations that Lisle was
not entitled to deduct losses related to FPC Subventure
Partnership because he never made a capital contribution to the
partnership (and, thus he was not a partner in the partnership)
and/or Lisle was not “at risk” within the meaning of sec. 465.
On June 13, 1994, Lisle filed a reply to respondent’s amendment
to answer. On July 26, 1994, Lisle filed a motion to strike
portions of respondent’s amendment to answer. Specifically,
Lisle moved to strike the portion of respondent’s amendment to
answer pertaining to FPC Subventure Partnership on the ground the
transaction “does not relate to ‘The Five’ in any way.” Lisle
further alleged that respondent’s attempt to raise the FPC
Subventure Partnership issue amounted to an attempt to use the
trial as an ongoing audit. On July 28, 1994, respondent filed an
objection to petitioners’ motion to strike and alleged that FPC
Subventure Partnership was directly related to The Five as
demonstrated by Schaffel’s testimony during the first phase of
the trial.
On July 28, 1994, the Court heard oral argument regarding
Lisle’s motion to strike. Transcr. at 3060-3096. On July 28,
1994, Special Trial Judge Couvillion granted Lisle’s motion to
strike insofar as respondent was seeking increased deficiencies
attributable to FPC Subventure Partnership.
Given that petitioners’ motion to strike was granted, the
FPC Subventure Partnership transactions will not increase the
amounts of Lisle’s tax liabilities for the years remaining at
issue. Nevertheless, our review of the record reveals that FPC
Subventure Partnership is highly relevant to respondent’s theory
that Kanter, Ballard, and Lisle earned the payments remitted by
(continued...)
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