- 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 partnership
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011