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The Tripp partnership agreement provided that petitioner’s
initial capital contribution would be $60,000 in cash and Mr.
Tripp’s contribution would be goods, property, and services valued
by the parties to the agreement at $15,000. The Tripp partnership
commenced its beauty salon operation on January 1, 2002. The
beauty salon did not generate income in any of the years in issue
and ceased operations in June of 2003.
The Tripp partnership timely filed a Form 1065, U.S. Return
of Partnership Income, for each of the years in issue. Attached
to each partnership return was a schedule showing each partner’s
distributive share of income or loss. A schedule furnished to
respondent with the 2003 partnership return (but not with the 2002
or the 2004 return) reported petitioner’s basis in the Tripp
partnership.3 In accordance with the amounts that were reported on
each Form 1065, petitioner deducted $30,681 as her distributive
share of the Tripp partnership loss on her 2002 return, $26,342 as
her distributive share of the Tripp partnership loss on her 2003
return, and $9,302 as her distributive share of the Tripp
partnership loss on her 2004 return.4 Except for one item of
3
The schedule for 2003 showed that petitioner’s basis in her
partnership interest at the beginning of the year was $4,332,
that her partnership contributions during the year totaled
$30,000, that her distributive share of the partnership’s loss
was $26,342, and that her partnership basis at the end of the
year was $7,990.
4The beauty salon continued to generate losses after it
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Last modified: November 10, 2007