- 3 -
Petitioners began investing in TBS 90-1 in 1991. That
partnership was subject to the unified audit and litigation
procedures of the Tax Equity and Fiscal Responsibility Act of
1982, Pub. L. 97-248, sec. 402(a), 96 Stat. 648. Petitioners
filed their 1992 Federal income tax return on April 15, 1993, and
claimed thereon a deduction for a $112,996 ordinary loss passing
to them from TBS 90-1.
In Durham Farms #1, J.V. v. Commissioner, T.C. Memo.
2000-159, affd. 59 Fed. Appx. 952 (9th Cir. 2003), the Court held
that TBS 90-1 was not entitled to deduct the loss claimed by
petitioners because TBS 90-1 did not receive the benefits and
burdens of ownership of the underlying asset (i.e., cattle). The
decision in Durham Farms ordered and decided the following as to
TBS 90-1:
Partnership Item As Reported As Determined
Depreciation expense $2,174,204 -0-
Interest expense 137,750 -0-
Accounting fees 3,086 -0-
Net Gain--Form 4797 5,435,510 -0-
Net self-employment income (2,315,040) -0-
Other farm deductions -0- -0-
Guaranteed payments -0- -0-
The $2,315,040 of deductions underlying the adjustment to net
self-employment income consisted of depreciation expense equal to
93.916476605 percent of the total disallowed deductions, interest
expense equal to 5.950221162 percent of the total disallowed
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Last modified: November 10, 2007