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income must be recognized by the partners of Parker Properties
and Twenty Mile as a separately stated item under section
702(a)(7), subject to the limitations of section 108 at the
partner level. Sec. 108(a), (d)(6); see also Estate of Newman v.
Commissioner, 934 F.2d 426, 427 n.1 (2d Cir. 1991), revg. T.C.
Memo. 1990-230; Gershkowitz v. Commissioner, supra at 1009.
Finally, petitioners contend that, because Riverbank
purchased apartment mortgages for an amount $650,000 in excess of
their fair market value, any cancellation of indebtedness income
should be reduced by this amount. Although Commercial received
approximately $650,000 more than it would have, we must consider
whether that excess inures to petitioners’ benefit for purposes
of determining taxable income.
Petitioners seek a reduction of recognizable income for the
excess payment. The payments, however, were not made on behalf
of partnerships for which respondent made determinations.
Accordingly, the $650,000 excess payment does not result in a
special allocation. See, e.g., Klein v. Commissioner, 25 T.C.
1045 (1956). Nor is this an instance where a partner is selling
or contributing property to the partnership. See, e.g., secs.
10(...continued)
debt is included in the cancellation of indebtedness income
realized by the joint ventures to the extent that the obligation
to pay interest was forgiven.
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