George A. and Marysue Coward - Page 12

            20, 1978, the amount of capital which each partner was to                                    
            contribute to the partnership was left blank.                                                
                  Respondent argues that because the partnership did not exist                           
            at the time of the cattle purchase, the partnership could not                                
            have engaged in the purchase and thus had no basis in the cattle.                            
            Therefore, respondent argues petitioner received no distributive                             
            share of basis in such cattle upon which petitioners can claim an                            
            investment tax credit.  Petitioners counter that the cattle                                  
            purchase was part of the pre-operating activities engaged in by                              
            Walter J. Hoyt III as general partner.  Petitioners argue that                               
            the partnership became a party to the transaction on formation.4                             
                  We find petitioners' argument persuasive.  Walter J. Hoyt                              
            III was purporting to act on behalf of Washoe Ranches #7 LTD.                                
            when he entered into the cattle purchase.  Washoe Ranches #7 LTD.                            
            became a party to the transaction in December 1978 when the                                  
            partnership accepted the cattle received as a result of the                                  
            purchase,5 and the partnership expressly accepted liability for                              

            4     Petitioners rely on California law in support of their                                 
            argument.  We do not understand California law to govern in this                             
            case as the record indicates that the partnership was formed as a                            
            Nevada limited partnership, the partnership agreement was filed                              
            with the county of Washoe, Nevada, and the principal offices of                              
            the partnership were located in Nevada.  Nothing in the record                               
            indicates that the partnership carried on its operations in                                  
            California.  However, we are persuaded that petitioners' position                            
            is consistent with Nevada law.                                                               
            5     The Supreme Court of Nevada has held that such acceptance of                           
            the benefits of the transaction constitutes ratification of the                              
            contract.  See, e.g., European Motors, Ltd. v. Oden, 344 P.2d                                
            195, 197 (Nev. 1959).  The Second Restatement of Agency                                      

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