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Acre Tract. The promissory note provided for calculation of
interest and repayment by BCI on or before a specific date. It
was secured by a deed of trust in favor of State Savings.
On July 11, 1984, an information return was filed for the
1983 tax year in the name of 70 Acre Recognition Equipment
Partnership. The return indicated that the sale of the 25-Acre
Tract had produced a $2,587,365 short-term capital gain.
Schedules K-1 (Partner's Share of Income, Credits, Deductions,
etc.) attached to the return allocated 50 percent of the short-
term capital gain to BCI and the other 50 percent to State
Savings. BCI reported its share of the short-term capital gain
on its corporate income tax return.
On January 8, 1991, respondent issued a notice of final
partnership administrative adjustment. In it, respondent reduced
the short-term capital gain to $2,170,571. Respondent
determined, however, that BCI and State Savings had not formed a
valid partnership for tax purposes. As a result, respondent
allocated 100 percent of the gain to BCI.
OPINION
Section 761(a) defines a partnership as including "a
syndicate, group, pool, joint venture or other unincorporated
organization through or by means of which any business, financial
operation, or venture is carried on, and which is not * * * a
corporation or a trust or estate." See also sec. 7701(a)(2).
Whether a partnership exists for tax purposes is determined under
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Last modified: May 25, 2011