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abandoning his interest and walked away from the venture. The
partnership continued in business. We held that a partner's
abandonment of his partnership interest resulted in a
decrease in his share of the partnership liabilities
within the meaning of section 752(b), not because he
ever had personal liability under State law, but
because he is no longer considered under the applicable
Code provisions as sharing in the nonrecourse
liabilities of the partnership.
O'Brien v. Commissioner, Id. at 118. Thus, the taxpayer was held
to have been relieved of his share of partnership liabilities
upon the abandonment of his interest, causing a constructive cash
distribution under section 752(b). Moreover, this constructive
distribution was held to be in liquidation of the partner's
interest; it occurred upon termination of his partnership
interest by abandonment. See also White v. Commissioner, 991
F.2d 657, 661 (10th Cir. 1993), affg. T.C. Memo. 1991-552
("reduction in partner's liabilities by reason of a partnership's
assumption of those liabilities is a cash distribution" citing
sec. 752(b)).
As noted, in the Settlement Agreement, petitioners'
respective shares of the partnerships' recourse liabilities were
decreased. Accordingly, under section 752(b), petitioners are
considered to have received constructive distributions through
the abandonment of their partnership interests and the
forgiveness of the outstanding investor notes by Admiral and the
partnerships. White v. Commissioner, supra.
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