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credibly that she paid the partnership’s shortfall. In this
regard, when asked about her participation in the partnership’s
affairs, petitioner stated:
I still am paying the bills out of my check from our
401(k) for this business right now. I am still paying
for it after it is gone. * * * I have given my money up
through all of the money avenues that I had, whether it
was my 401(k), or whether it was my equity loans, my
cash, my own wages, my bonus checks, as well as credit
cards. I have been paying, and paying, and paying to
try and help keep the business afloat at the time that
it was active, and afterwards I am paying because I like
keeping my credit and everything being A-1.
In any event, we find that respondent failed to carry his
burden of showing that petitioner did not make contributions to
the partnership in amounts sufficient to give her an adjusted
basis in her partnership interest at least equal to the claimed
deductions for losses for the taxable years in issue.
With respect to the second issue–-i.e., the allowance of a
deduction for salary expense in 2003 for the value of property
(cash and equipment) transferred to the cosmetologist in exchange
for services--section 162(a)(1) allows as a deduction “a
reasonable allowance for salaries or other compensation for
personal services actually rendered”.
Respondent does not dispute that a transfer of cash and
equipment took place and that the recipient was an experienced
cosmetologist with whom Mr. Tripp had had previous business
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