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Petitioner and Mr. White further orally agreed that the
partnership would pay both petitioner and White Enterprises
approximately $1,000 per month for the partnership’s use of
equipment owned by each of them. The purpose of the foregoing
arrangement was to ensure that each partner would be paid
(directly or, in the case of Mr. White, indirectly) for services
provided to the partnership. If, for some reason, the services
were not provided, the partnership, if appropriate, would engage
a nonpartner to perform them and the accruals for the services
would cease.
Petitioner and Mr. White executed a written partnership
agreement on March 1, 1984 (partnership agreement). With respect
to the management of the partnership, paragraph 7 of the
partnership agreement states:
The management of the Partnership shall be conducted by all
of the Partners, provided that no Partner shall obligate the
Partnership to any third party for an amount in excess of
Two Thousand Five Hundred ($2,500.00) Dollars, without the
consent of all of the Partners. The Partners shall be
entitled to such salary compensation for acting in the
Partnership business, as shall be agreed to.
Construction of the condominiums commenced after petitioner
and Mr. White entered into the partnership agreement. As soon as
the partnership completed the first building, sales of individual
units in that building, as well as of units to be built in the
near future, commenced. The partnership completed construction
of all of the condominiums by the end of 1986. The cost of the
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