Pacific Sound Production Limited Partnership v. Commissioner

• Decision Date: 08 June 1993
• Docket Number: Docket No. 2976-88.,Docket No. 20878-89.,Docket No. 3029-88.,Docket No. 3027-88.,Docket No. 20877-89.,Docket No. 20537-87.,Docket No. 3028-88.
• Citation: 65 T.C.M. 2898
• Parties: Pacific Sound Production Limited Partnership, a.k.a. Pacific Sound Limited Partnership, Gerald B. Henning, Tax Matters Partner, et al.<SMALL><SUP>1</SUP></SMALL> v. Commissioner.
• Court: U.S. Tax Court

65 T.C.M. 2898

T.C. Memo. 1993-253

Pacific Sound Production Limited Partnership, a.k.a. Pacific Sound Limited Partnership, Gerald B. Henning, Tax Matters Partner, et al.¹ v. Commissioner.

Docket No. 20537-87.

Docket No. 2976-88.

Docket No. 3027-88.

Docket No. 3028-88.

Docket No. 3029-88.

Docket No. 20877-89.

Docket No. 20878-89.

United States Tax Court.

Filed June 8, 1993.

Darrell D. Hallett, Larry N. Johnson, 1101 Western Ave., Seattle, Wash., and Jeannette A. Cyphers, 9709 3rd Ave., Seattle, Wash., for the petitioners. Wendy S. Pearson, Blake W. Ferguson, and Peter R. Hockman, for the respondent.

Memorandum Findings of Fact and Opinion

DAWSON, Judge:

These cases were assigned to Special Trial Judge Norman H. Wolfe pursuant to the provisions of section 7443A(b)(4) and Rules 180, 181, and 183.² The Court agrees with and adopts the opinion of the Special Trial Judge, which is set forth below.

Opinion of the Special Trial Judge

WOLFE, Special Trial Judge:

Respondent, by notices of final partnership administrative adjustments (FPAA), and by subsequent amendments to answer, determined adjustments to petitioners' partnership returns for the years 1982, 1983, and 1984 as follows:

                Pacific Sound Production Limited Partnership
                Docket No. 20537-87
                Year   Description of Adjustment                 Amount
                1982   Ordinary loss disallowed.............   $    5,094
                       Investment tax credit qualifying
                         property reduction ................    2,305,600
                1983   Ordinary loss disallowed ............      376,964
                       Investment tax credit qualifying
                         property reduction ................      311,200
                         Audio Advertising Limited Partnership
                Docket No. 2976-88
                Year   Description of Adjustment                 Amount
                1983   Legal expenses disallowed ...........   $    4,924
                       Lease expense disallowed ............        1,013
                       At risk basis reduction .............      163,100
                       Investment tax credit qualifying
                         property reduction ................    1,524,683
                       Adjustments Raised in Amended
                       Answer                                    Amount
                       Lease expense .......................   $    1,013
                       License fee .........................      246,429
                       Amortization ........................          492
                       Promotion/seminar expense............          372
                       Bank charges.........................           98
                       Legal fees ..........................        4,924
                                                               __________
                                                               $  253,328
                       Adjustment per original FPAA ........        5,937
                                                               __________
                       Increase of adjustments for 1983 ....   $  247,391
                Other adjustments for 1983
                       a. Investment tax credit basis
                       As reported .........................   $1,597,679
                       Adjustment per original FPAA ........    1,524,683
                                                               __________
                       Adjustment increase .................   $   72,996
                       b. At risk basis limitation to
                            partners
                          As reported ......................   $  253,328
                          Adjustment per original FPAA            163,100
                                                               __________
                          Adjustment increase...............   $   90,228
                Year   Description of Adjustment                 Amount
                1984   Management fees disallowed ..........   $    9,300
                       At risk basis reduction .............      218,462
                       Adjustments Raised in Amended
                       Answer                                    Amount
                       Legal expense .......................   $      438
                       Lease expense .......................      369,643
                       Interest expense ....................       24,643
                       Travel expense ......................          856
                       Amortization ........................          657
                       Bank charges ........................           31
                       Accounting expense...................        1,015
                       Insurance expense ...................        1,498
                       Promotion/seminar expense ...........          441
                

                      Distribution expense.................       10,945
                       Office expense ......................          345
                       Management fees .....................        9,300
                                                               __________
                                                               $  419,812
                       Adjustment per original FPAA ........        9,300
                                                               __________
                       Increase of adjustments for 1984 ....   $  410,512
                       Other adjustments for 1984
                       a. Basis limitation to partners
                          As reported ......................   $  415,734
                          Adjustment per original FPAA            218,462
                                                               __________
                          Adjustment increase...............   $  197,272
                      Assured Communications Limited Partnership,
                Docket No. 3027-88
                Year   Description of Adjustment                 Amount
                1984   Commission expense disallowed .......   $   31,500
                       Legal fees disallowed ...............       12,756
                       License expense disallowed...........       89,750
                       Basis reduction .....................      355,313
                       Investment tax credit qualifying
                         Property reduction ................    2,065,521
                       Adjustments Raised in Amended
                       Answer                                    Amount
                       Accrued lease payments ..............   $  495,000
                       License fees.........................       89,750
                       Distribution fees ...................       32,807
                       Legal/professional fees..............       12,756
                                                               __________
                                                               $  630,313
                       Adjustment per original FPAA ........      134,006
                                                               __________
                       Increase of adjustments for 1984 ....   $  496,307
                       Other adjustments for 1984:
                       a. Investment tax credit basis:
                          As reported ......................   $2,161,111
                          Adjustment per original FPAA          2,065,521
                                                               __________
                          Adjustment increase...............   $   95,590
                       b. Basis limitation to partners:
                          As reported ......................   $  630,313
                          Adjustment per original FPAA            355,313
                                                               __________
                          Adjustment increase...............   $  275,000
                      Advanced Communications Limited Partnership,
                Docket No. 3028-88
                Year   Description of Adjustment                 Amount
                1983   Legal fees disallowed ...............   $    1,200
                       Lease expense disallowed ............          809
                       Basis limitation.....................       14,359
                       Investment tax credit qualifying
                         property reduction ................    1,243,781
                       Adjustments Raised in Amended
                       Answer                                    Amount
                       Lease expense .......................   $      809
                       License expense......................       24,614
                       Amortization.........................           13
                       Legal fees ..........................        1,200
                                                               __________
                                                               $   26,636
                       Adjustment per original FPAA ........        2,009
                       Increase of adjustments for 1983 ....   $   24,627
                                                               __________
                       Other adjustments for 1983:
                       a. Investment tax credit basis:
                          As reported ......................   $1,276,620
                          Adjustment per original FPAA          1,243,781
                                                               __________
                          Adjustment increase ..............   $   32,839
                       b. Basis limitation to partners:
                          As reported ......................   $   26,636
                          Adjustment per original FPAA             14,359
                          Adjustment increase...............   $   12,277
                Year   Description of Adjustment                 Amount
                1984   Management fees disallowed ..........   $    9,415
                       Legal expenses disallowed ...........        5,693
                       Basis limitation.....................      188,025
                       Adjustments Raised in Amended
                       Answer                                    Amount
                       Legal fees ..........................   $    5,693
                       Lease expense .......................      295,362
                       Interest expense ....................       20,252
                       Travel expense ......................          830
                       Amortization ........................          983
                       Bank charges.........................           44
                       Accounting expense...................          768
                       Distribution expense.................       10,187
                       Office expense ......................        1,900
                       Management fees .....................        9,415
                                                               __________
                                                               $  345,434
                       Adjustment per original FPAA ........       15,108
                                                               __________
                       Increase of adjustments for 1984 ....   $  330,326
                       Other adjustments for 1984:
                       a. Basis limitation to partners:
                          As reported ......................   $  338,618
                          Adjustment per original FPAA            188,025
                                                               __________
                          Adjustment increase...............   $  150,593
                   Masterwork Productions Leasing Limited Partnership,
                Docket No. 3029-88
                Year   Description of Adjustment                 Amount
                1983   Depreciation expense disallowed .....   $  154,501
                       Rental expense disallowed ...........       49,981
                       Adjustments Raised in Amended
                       Answer                                    Amount
                       Lease placement fees ................   $   23,331

...