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with the Stovers’ counsel. The Anis parties decided to form a
partnership to hold property they expected to receive from the
Stovers.
The initial draft of the partnership agreement provided that
the partnership would be owned by Smith, the Anises, and
petitioner in proportion to their interests in the recovery;
i.e., the Anises 50 percent, Smith 27.625 percent, and petitioner
22.375 percent. In an April 24, 1994 letter, Smith advised the
Anises and petitioner that any cash received from the Stovers
would be taxable upon receipt, and that they should get a legal
opinion as to the tax consequences of the transaction.
In 1995, Smith formed the Anis Recovery Fund partnership
(the Anis partnership) to negotiate the bankruptcy court
settlement with the Stovers and to hold certain real property
that the Anis parties expected to receive under the settlement.
Smith was the tax matters partner for the partnership.
On January 24, 1995, Smith wrote to petitioner, the Anises,
and Marc Tow, counsel for the Anis parties in the bankruptcy
court proceeding. Smith enclosed the settlement agreement and a
proposed Anis partnership agreement for Anis and petitioner to
sign.
Petitioner told Smith that he wanted his name removed from
the partnership agreement and his two children, Drew and Allison
Graham, named as partners. Smith removed petitioner’s name from
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