Tax Audit Problem Memorandum
There are several areas of concern with the Rippers’ 2017 return. There appear to be multiple
minor errors along with several issues the IRS may raise. The bottom line up front is the
following.
• The K-1 from LBR I is not reporting the income earned from JTR. That is a $58,987,500
misstatement of income. It appears to be ‘washing through’ LBR I and disappearing. The
interest income disappears as well. The rationale is that those items from LBR I’s K-1 are
only being reported for the activities of LBR I, they do not reflect the addition of those
items from JTR – it became obvious because the K-1 income is smaller from LBR I than
that from JTR, even though it is a 50% partner and should have included JTR income.
• These partnerships are not paying self-employment taxes as they should if Jack and/or
