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provide for capital contributions or liquidating distributions, but
only granted profit interests in the partnership.
Because petitioner received no liquidating distributions in
1991, petitioner's gain or loss in the partnership must be
calculated as of the time he withdrew from the partnership on
December 31, 1990. See sec. 1.736-1(a)(5), Income Tax Regs.
Consequently, petitioner cannot deduct in 1991 the amount of any
loss due to his withdrawal from the Heidelberg & Woodliff
partnership.
Issue 2. Salary Reduction Plan Distribution
The second issue for decision is whether petitioner must
include $85,455 in income as a taxable distribution from the
Heidelberg & Woodliff salary reduction plan upon his termination
from the law firm. Petitioner contends that he was not properly
notified of the cancellation of the note and that equity requires
leniency. Respondent asserts that under the terms of the plan and
the note, there were three separate grounds for requiring immediate
repayment of petitioner's note and treating it as having been
repaid and satisfied in 1991: (1) Petitioner failed to make the
required quarterly payments, and thus, was in default of payment;
(2) petitioner's employment with Heidelberg & Woodliff had
terminated; and (3) because petitioner's plan balance was to be
distributed to him in 1991, the plan's terms required that the note
be paid first. We agree with respondent's assertions.
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