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not involve a partnership interest or an interpretation of
section 1398(f). We disagree. See Smith v. Commissioner, supra.
Thus, the transfer of petitioner’s interest in GSD to the
bankruptcy estate was not a sale or exchange, and did not cause
GSD to terminate. See sec. 1398(f).
B. Whether Petitioner Sold or Exchanged His Interest in GSD on
July 11, 1991, Under Section 706(c)(2)
A partnership’s tax year closes with respect to a partner
who sells or exchanges his interest in a partnership, and with
respect to a partner whose interest is liquidated. See sec.
706(c)(2)(A). Petitioners contend that petitioner’s bankruptcy
caused him to cease being a general partner in GSD under Texas
law, and that his withdrawal from GSD triggered a distribution to
him of the fair value of his interest. See Tex. Rev. Civ. Stat.
Ann. art. 6132a-1, secs. 6.02, 6.04 (West 1999). Thus,
petitioners contend that GSD’s tax year closed as to petitioner
under section 706(c)(2) on July 11, 1991. We disagree. We
conclude for the reasons stated at paragraph A-2, above, that
petitioner did not sell, exchange, or liquidate his interest in
the partnership for purposes of section 706(c)(2)(A) when he
filed the bankruptcy petition.
C. Whether Interest Expense Is Allocated Pro Rata Between
Petitioner and the Bankruptcy Estate Under Section 706(d)
Petitioners contend that, under section 706(d), GSD’s losses
for the period from January 1 to July 11, 1991, are allocated to
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