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Respondent argues that gain should be recognized in the amount of
liabilities petitioners were relieved of when Mr. Bach disposed
of his interests in the partnerships.6 These amounts correspond
to the deficit balances in Mr. Bach’s capital accounts in the
partnerships before the disposition of each partnership interest.
At trial and on brief, petitioners did not contest the propriety
of respondent's determination that those amounts should be
considered proceeds from the dispositions of Mr. Bach's
partnership interests for purposes of determining his capital
gains.
Petitioners argue that certain transactions involving ISI
and the partnerships should be factored into our overall
determination of their 1987 tax liability.
Petitioners argue that they are entitled to "set off" gains
determined by respondent by bad debt deductions which were not
6Sec. 741 provides: "In the case of a sale or exchange of
an interest in a partnership, gain or loss shall be recognized to
the transferor partner. Such gain or loss shall be considered as
gain or loss from the sale or exchange of a capital asset". Sec.
752(d) provides: "In the case of a sale or exchange of an
interest in a partnership, liabilities shall be treated in the
same manner as liabilities in connection with the sale or
exchange of property not associated with partnerships." See also
Commissioner v. Tufts, 461 U.S. 300 (1983); Crane v.
Commissioner, 331 U.S. 1 (1947). Sec. 752(b) provides: "Any
decrease in a partner's share of the liabilities of a
partnership, or any decrease in a partner's individual
liabilities by reason of the assumption by the partnership of
such individual liabilities, shall be considered as a
distribution of money to the partner by the partnership."
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