Lillie M. Tripp - Page 8




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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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