- 4 -4
Sometime during the late 1980's, the firm adopted a new
partnership agreement that granted partners only income interests
in the firm rather than specific interests in the firm's assets.
Partners under the old partnership agreement were bought out by the
partnership. Thus, under the new partnership agreement, partners
did not make capital contributions when they entered the
partnership, and received no liquidating distributions when they
left. The income interests were based on an annual evaluation of
each partner through a point system used by the firm's compensation
committee. In 1990, petitioner had an 8.86-percent interest in the
partnership.
On January 2, 1991, petitioner gave notice of his termination
from the firm, effective retroactively to December 31, 1990.
Petitioner then left Heidelberg & Woodliff, and together with
several other individuals who had earlier left the firm, started a
new law firm. At the time petitioner left Heidelberg & Woodliff,
he was the firm's largest producer.
Petitioner's 1990 Schedule K-1 on Form 1065 (Partner's Share
of Income, Credits, Deductions, Etc.) from Heidelberg & Woodliff
reported petitioner's capital account adjustments as follows:
(a) Capital account at $(21,369)
beginning of year
(b) Capital contributed ---
during year
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