Interhotel Company, LTD., Torrey Hotel Enterprises, Inc., Tax Matters Partner - Page 14

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          Additionally, the economic effect of the allocation must be                 
          substantial; this requires "a reasonable possibility that the               
          allocation (or allocations) will affect substantially the dollar            
          amounts to be received by the partners from the partnership,                
          independent of tax consequences."  Sec. 1.704-1(b)(2)(iii)(a),              
          Income Tax Regs.                                                            
                         b.  Capital Accounts                                         
               Determinations of substantial economic effect, as well as              
          determinations of a partner's interest in the partnership, depend           
          upon an analysis of the partners' capital accounts. Generally               
          speaking, a partner's capital account represents the partner's              
          equity investment in the partnership.  The capital account balance          
          is determined by adding (1) the amount of money that the partner            
          contributes to the partnership, (2) the fair market value of                
          property the partner contributes (net of liabilities to which the           
          property is subject or which are assumed by the partnership), and           
          (3) any allocations of partnership income or gain.  A partner's             
          capital account is decreased, however, by the amount of money that          
          the partnership distributes to the partner, and by the amount of            
          any allocation to such partner of losses and deductions. The                
          capital account is also reduced by the fair market value of                 
          property distributed to the partner, net of any liability that the          
          partner assumes, or to which the property is subject.  Sec. 1.704-          
          1(b)(2)(iv), Income Tax Regs.                                               






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