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KCPI. The purchase agreement between Dr. Karason and Dr. Flom
did not mention petitioner’s name, indicate that the medical
equipment was assigned to petitioner, or that petitioner was
going to purchase the equipment.
D. Karason Capital Partners
Petitioner formed KCP in 1989 with members of his family for
the purpose of investing in property.4 Petitioner prepared all
of KCP’s Federal partnership tax returns. According to the
partnership returns, petitioner was a partner from 1989 through
1993 and 1996 through 2001,5 and Dr. Karason was a partner in KCP
from its formation.6 In 2001, petitioner owned a 70-percent
interest in KCP, and Dr. Karason owned the remaining 30 percent.
During 2001, KCP’s purported business activities included
renting real property and breeding race horses. KCP’s Form 1040
Schedule E, Supplemental Income and Loss, for 2001 reported that
the rental properties generated a $31,337 loss, and Form 1040
Schedule F, Profit or Loss From Farming, for 2001 reported the
horse breeding activities generated a $13,933 loss. KCP’s
Schedule K-1, Partner’s Share of Income, Credits, Deductions,
4 The partnership also went by the names Karason Family
Partnership and Karason Family Investment Club.
5 Petitioner did not own a direct partnership interest in
KCP in 1994 and 1995.
6 From 1990 through 1999, KCP’s partners at various times
included petitioner’s mother, father, and various other entities.
Petitioner and Dr. Karason were the only partners in 2001.
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Last modified: November 10, 2007