- 17 - the indisputable fact that the partnerships assigned the investor notes to the lenders in return for real estate loans. Once the partnerships defaulted on the aforementioned loans, all title and interest passed to the lenders. In due course, Admiral, therefore, possessed the right to hold the limited partners liable on the investor notes. Indeed, petitioners evidently concede as much. In that regard, the Settlement Agreement divested the limited partners of liability for the outstanding investor notes. Also, in the event that the investors were still held liable by third parties for the investor notes contributed to the partnerships, Admiral agreed to compensate or save harmless the aforementioned investors. Accordingly, the investors' execution of the Settlement Agreement resulted in distributions to them under section 752(b). We reject, likewise, petitioners' contention that they are not liable for a section 752(b) deemed distribution because there was no actual cash distribution. Although there was no such distribution, petitioners are, pursuant to section 752(b), considered to have received a deemed or constructive distribution when they were relieved of their share of the partnerships' debts. O'Brien v. Commissioner, 77 T.C. 113, 118 (1981). Specifically, O'Brien v. Commissioner, supra, involved a partner's abandonment of his interest in a real estate partnership. The partnership held real estate subject to nonrecourse debt. The taxpayer sent a letter to the partnershipPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
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