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To substantiate his basis in KCP, petitioner provided his
personal bank account statements from the Auto Workers Credit
Union and a handwritten statement, without supporting
documentation, stating his adjusted basis in KCP in 2001 was
$221,194, calculated as follows:
Item Amount
JCK (K-1) share of $ 70,000
recourse liabilities
Petitioner’s beginning 159,746
capital account
2001 cash contributions 23,000
2001 income/loss per K-1
for JCK share (net) 1(31,552)
Ending capital account 221,194
1 Petitioner reduced the $31,689 loss reported on KCP’s Schedule K-1 for
2001 to reflect his receipt of $137 of ordinary dividend income ($31,689 -
$137 = $31,552).
Respondent determined that petitioner failed to establish
his cost basis in the medical equipment and failed to provide
supporting information to substantiate his basis in KCP. On June
29, 2005, respondent mailed petitioner a notice of deficiency
disallowing his section 179 expense and section 167 depreciation
deductions of $25,594, and his share of KCP’s losses of $31,689.
F. Tax Court Proceedings
Petitioner timely filed his petition on July 5, 2005. On
January 6, 2006, respondent served on petitioner a request for
production of documents. The documentation requested included
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Last modified: November 10, 2007