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losses incurred in 2002, 2003, and 2004 is new matter and
therefore acknowledges that he bears the burden of proof with
respect to this issue.
Section 704(d) limits the deductibility of a partner’s
distributive share of partnership losses. Those losses are
deductible only to the extent of the adjusted basis of the
partner’s interest in the partnership. Sennett v. Commissioner,
80 T.C. 825 (1983), affd. 752 F.2d 428 (9th Cir. 1985). A
partner’s adjusted basis in the partnership is essentially the
partner’s contribution to the partnership increased by the
partner’s distributive share of partnership income and decreased
by all cash distributions and the partner’s distributive share of
partnership losses. Sec. 705(a). If a partner’s distributive
share of partnership losses is greater than the partner’s
available adjusted basis, the excess loss cannot be deducted in
that year but must instead be carried forward until the partner
has an adjusted basis sufficient in amount to offset the amount of
the loss. See sec. 1.704-1(d)(1), Income Tax Regs.
Respondent contends that petitioner, notwithstanding her
obligation to contribute $60,000 to the Tripp partnership pursuant
to the partnership agreement, failed to establish that (1) she
made such an initial capital contribution (which would have given
her a basis in her partnership interest), or (2) she subsequently
paid any partnership liabilities which would be considered capital
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Last modified: November 10, 2007