- 19 - 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 thePage: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Next
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