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contributions. Continuing, respondent contends that as the Tripp
partnership never generated income, petitioner’s adjusted basis
was not sufficient to permit her to deduct her distributive share
of partnership losses in any of the years in issue. In support of
his contention, respondent points to the lack of documentary
evidence regarding the initial contribution by petitioner as well
as the lack of evidence regarding her subsequent payment of
partnership debt. While petitioner did not document her capital
contributions to the Tripp partnership, we are satisfied, after
observing her while she testified, that she did in fact make such
contributions.
The Tripp partnership financial records, prepared using the
cash method of accounting, show, and respondent does not contest,
that the beauty salon the partnership operated was not profitable
during 2002 or 2003 and continued to generate losses in 2004 even
though it ceased operations in June of 2003. The expenses of the
Tripp partnership routinely exceeded its revenues, and the record
reveals that virtually all of the partnership expenses were paid
in cash. Depreciation was not significant because the partnership
leased its equipment and premises.
Mr. Tripp did not have the resources to make meaningful cash
contributions to the partnership to cover its operating shortfall.
Rather, it was petitioner who had the resources (from her
substantial wage income), and she testified forcefully and
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