John Karason - Page 14




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          and Dr. Karason were brothers.  The Court finds this difficult to           
          believe.  Petitioner was employed by the IRS for more than 17               
          years either auditing or supervising the audits of taxpayers.  He           
          should have known to document the purported purchase of the                 
          medical equipment, the lease agreement with KCPI, and the medical           
          equipment’s cost and FMV.                                                   
               Petitioner did not produce any documentation showing either            
          he invested in or purchased the medical equipment.  For the                 
          foregoing reasons, the Court concludes petitioner is not entitled           
          to deduct the costs of the medical equipment under sections 179             
          and 167.11                                                                  
          II. Karason Capital Partners                                                
               Petitioner contends he had a sufficient basis in KCP to                
          allow him to deduct $31,689 as passthrough losses from KCP in               
          2001.                                                                       
               Respondent contends petitioner failed to substantiate his              
          purported adjusted basis in KCP, and he cannot deduct the $31,689           
          of passthrough losses from KCP.                                             
               Section 704(d) limits the deduction of a partner’s                     
          distributive share of partnership loss to the partner’s adjusted            
          basis in the partnership at the end of the partnership year.                
          Sec. 1.704-1(d)(1), Income Tax Regs.  The partner’s adjusted                

               11 Because this Court found that petitioner did not invest             
          in or purchase the equipment, Dr. Karason’s bank loan payments of           
          $16,662 did not constitute income to petitioner.                            





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