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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