-35-
We believe that because IHCL could not force PLH and PGL to
dispose of the property that generated the nonrecourse deductions,
petitioner's argument fails. There would be no decrease in PLH's
or PGL's minimum gain upon a deemed liquidation of IHCL. Sec.
1.704-1T(b)(4)(iv)(d), Temporary Income Tax Regs., 53 Fed. Reg.
53163 (Dec. 30, 1988). Thus, there would be no minimum gain
chargeback to IHCL. Sec. 1.704-1T(b)(4)(iv)(f), Temporary Income
Tax Regs., 53 Fed. Reg. 53163 (Dec. 30, 1988). Correspondingly,
there would not be, as petitioner contends, an increase in the
partners' capital accounts sufficient both to eliminate THEI's
deficit account and to pay the positive capital account of Mr.
Manchester. To the contrary, petitioner has failed to refute
respondent's position that Mr. Manchester alone would be eligible
to receive any gain upon liquidation of the partnership under the
IHCL Restated Agreement. (That agreement mandates that, upon
liquidation, distributions are to be made in accordance with the
partners' positive capital account balances.) Accordingly, we
reject petitioner's argument that allocation of partnership income
to THEI is in accordance with the comparative liquidation test of
section 1.704-1(b)(3)(iii), Income Tax Regs.5
5 In this case, we expressly do not decide whether the
comparative liquidation test in sec. 1.704-1(b)(3)(iii), Income
Tax Regs., would take into account the dissolution of lower tier
partnerships when the upper tier partnership (whose allocations
are at issue) can compel such a dissolution.
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