Dakotah Hills Offices Limited Partnership, An Arizona Limited Partnership, William M. and Dianne B. Stephens, Tax Matters Partners, et al. - Page 19

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                      It has been determined that the discharge                       
                 of liability on the partners’ capital contribu-                      
                 tion notes in 1989 resulted in a partnership                         
                 distribution pursuant to Internal Revenue Code                       
                 Section 752(b).                                                      

                 A more detailed description of respondent’s determi-                 
             nation is set forth in the Form 4605-A, Examination                      
             Changes--Partnerships, Fiduciaries, S Corporations, and                  
             Interest Charge Domestic International Sales Corporations,               
             dated January 26, 1993, that was prepared by the revenue                 
             agent who audited Dakotah Hills and the other limited                    
             partnerships.  In this opinion, we refer to this form as                 
             the RAR.                                                                 
                 According to the RAR, each of the 14 limited partners                
             of Dakotah Hills who joined the Settlement Agreement was                 
             relieved of the obligation of paying his or her “capital                 
             contribution note” and, in effect, was relieved of                       
             liability for a portion of the partnership’s nonrecourse                 
             debt.  According to the RAR, this decrease in each                       
             partner’s share of partnership liabilities is a                          
             constructive distribution of money, pursuant to section                  
             752(b).  The RAR describes the effect of the constructive                
             distribution to the investors, as follows:                               

                      After considering the discharge of their                        
                 capital contribution notes, Investors had no                         
                 out of pocket capital contribution and no further                    
                 obligation to make any future capital                                
                 contribution.  Therefore, after following the                        




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