Lillie M. Tripp - Page 7




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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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