- 9 - loss is capital or ordinary. Petitioners recognize that the sale of a partnership interest gives rise to capital gain or loss. Resolution of this issue, therefore, turns on a factual question of whether petitioner's loss resulted from his sale of a partnership interest in Bass Associates, as respondent contends, or whether the loss resulted from petitioner's sale of real property used in a trade or business, as petitioners contend. Whether a partnership exists for Federal income tax purposes is governed by Federal law. Commissioner v. Tower, 327 U.S. 280, 287-288 (1946); Estate of Kahn v. Commissioner, 499 F.2d 1186, 1189 (2d Cir. 1974), affg. Grober v. Commissioner, T.C. Memo. 1972-240; Frazell v. Commissioner, 88 T.C. 1405, 1412 (1987); sec. 1.761-1(a), Income Tax Regs. The term "partnership" is broadly defined in section 761 as a "syndicate, group, pool, joint venture or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on," but is not a corporation, trust, or estate. See also sec. 7701(a)(2). Recognition of partnership for Federal tax purposes requires that the parties conduct some business activity. Estate of Winkler v. Commissioner, T.C. Memo. 1997-4. The regulations in this regard provide as follows: Mere co-ownership of property which is maintained, kept in repair, and rented or leased does not constitute a partnership. * * * Tenants in common, however, may be partners if they actively carry on a trade, business,Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011