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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,
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