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F. The Facts and Circumstances Regulations
Both parties have made alternative arguments dependent upon
other factors listed in the regulations as appropriate for
consideration in resolving issues of partners' interests. The four
factors to be considered are: (1) The partners' relative
contributions; (2) the partners' interests in economic profits and
losses; (3) the partners' interests in cash-flow and other
nonliquidating distributions; and (4) the partners' rights to
distributions of capital upon liquidation. Sec. 1.704-1(b)(3)(ii),
Income Tax Regs.
In this case, petitioner has failed to establish that these
four factors support its position that THEI rather than Mr.
Manchester should be allocated substantially all (99 percent) of
IHCL's income for the period after June 20, 1991.
As to the first factor, i.e., contributions, neither THEI nor
Mr. Manchester (except for a possible $150 contribution) made any
contributions to IHCL. To be sure, THEI participated in some manner
in acquiring a loan guaranty for IHCL, but THEI was given no credit
in its capital account for such an endeavor. Mr. Manchester
invested $5 million, but he did so to acquire Dondi's interest in
IHCL; he did not invest in IHCL himself.
In regard to the second factor, i.e., the partners' interests
in economic profits and losses, although the second amendment to
the IHCL Restated Agreement allocated all net income to THEI,
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