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The partnership agreement also contained the statement that
“All decisions and management of the partnership shall be made by
the majority of the shares held by the partners.” The
partnership shares were in $1,000 units, with total capital
investment set at $300,000. No partner possessed a majority
percentage interest in Cascade. The partner with the largest
percentage interest, as of the close of 1982, was William Smart.
Cascade, a TEFRA1 partnership for Federal tax purposes, was
formed as an investment vehicle for the 20 Price Waterhouse
accounting partners to collectively invest as a limited partner
in Wall Street Associates (Wall Street), a partnership not
subject to the provisions of TEFRA. Wall Street issued a
Schedule K-1 in Cascade’s name in care of Walsh. By a letter
dated February 27, 1985, respondent notified Cascade of the
commencement of an examination of Cascade’s 1982 and 1983 income
tax returns under the unified partnership audit procedures of
sections 6221-6233.2 The letter was addressed to “Cascade
Partnership, Tax Matters Partner, Third Floor, Times Square
Building, Seattle, Washington 98101.” An Information Document
1 TEFRA partnership provisions were added to the Code by
the Tax Equity & Fiscal Responsibility Act of 1982 (TEFRA), Pub.
L. 97-248, sec. 402(a), 96 Stat. 324, 648.
2 All section references are to the Internal Revenue Code
in effect for the year in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
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Last modified: May 25, 2011