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reported distributive share of allowable ordinary income of Douglas
F. Manchester (Mr. Manchester) with respect to Interhotel Co., Ltd.
(IHCL), a California limited partnership, for the taxable year
1991. As a result of this proposed increase, respondent determined
that Mr. Manchester, as a partner of IHCL, should also be subject
to adjustments for alternative minimum tax and tax preference items
totaling $23,490. The issues for decision are whether IHCL's
allocation of the partnership items at issue either has substantial
economic effect or is consistent with the partners' interests in
IHCL. For the reasons set forth herein, our responses to both
inquiries are in the negative. Therefore, we sustain respondent's
reallocation.
Unless indicated otherwise, all section references are to the
Internal Revenue Code as in effect for the year under
consideration. All Rule references are to the Tax Court Rules of
Practice and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The
stipulation of facts and the attached exhibits are incorporated
herein by this reference.
(...continued)
earnings are at issue here, had ordinary income from its
business activities in the amount of $404,950, not $355,745 as
reported on its Form 1065 for taxable year 1991. In addition,
respondent determined that the partnership was entitled to "Other
Deductions, Professional Fees" in the amount of $2,228, instead
of the $51,433 reported for the same year. The parties resolved
these issues by agreement prior to trial.
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