Interhotel Company, LTD., Torrey Hotel Enterprises, Inc., Tax Matters Partner - Page 35

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               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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