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return, they reported $4,209 of nonpassive income from Schedule
K-1, Shareholder's Share of Income, Credits, Deductions, etc.,
attached to the 1994 Form 1120S, U.S. Income Tax Return for an S
Corporation, filed by Dr. Derby's wholly owned professional
corporation, Charles A. Derby, M.D., Inc. The referenced
Schedule K-1 states that Dr. Derby's share of his S corporation's
1994 ordinary income from business activities was $7,874. The
notice of deficiency issued to the Derbys increased their 1994
income by $3,665, the difference between the foregoing figures on
the Schedules K-1 and E.
OPINION
I. Petitioners' Entitlement to Charitable Contribution
Deductions for Their Transfers of Intangible Assets to SMF
A. Transfer Without Adequate Consideration
Petitioners contend that as part of the transfer of their
medical practices to SMF they each made a charitable contribution
to that entity of the intangible assets of the practices.
Respondent determined that the deductions petitioners claimed on
account of the charitable contributions are not allowable, and we
must decide the extent, if any, to which they may be deducted.
Petitioners bear the burden of proving their entitlement to those
deductions. See INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84
(1992); Deputy v. Du Pont, 308 U.S. 488, 493 (1940); New Colonial
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