- 35 -
Pecaris partnership agreement, petitioner had and continues to
have a 25-percent profits and losses interest in the partnership.
Thus, 25 percent of Pecaris' gain from its sale of its entire
interest in the Mall must be allocated to petitioner under the
partnership allocation rules, regardless of what was distributed
to him in cash. United States v. Basye, supra at 453 ("it is
axiomatic that each partner must pay taxes on his distributive
share of the partnership's income without regard to whether that
amount is actually distributed to him"); Curtis v. Commissioner,
T.C. Memo. 1995-344 (few principles of partnership taxation are
more firmly established than the notion that, no matter the
reason for nondistribution, each partner must pay taxes on his
distributive share).
Petitioners also argue that any allocation to petitioner of
gain from the sale of the Mall would not have "substantial
economic effect" under section 704(b) and the regulations
thereunder. Petitioner's argument is premised on the conclusion
we've already rejected, that the Mall transaction, insofar as
petitioner is concerned, amounted to a distribution to him by
Pecaris of an undivided interest in the Mall that he contributed
to Coastal. The inclusion of the $700,000 credit in the amount
realized by and recognized to Pecaris and distributed by Pecaris
to petitioner, supports our conclusion that the allocation of a
distributive share of the Pecaris gain to petitioner has
Page: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 NextLast modified: May 25, 2011