- 18 - 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.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