- 40 -
A few months after issuing Rev. Rul. 88-77, supra, the
Commissioner issued section 1.752-1T(g), Temporary Income Tax
Regs., 53 Fed. Reg. 53143, 53150-53151 (Dec. 30, 1988), defining
“liability” in pertinent part as follows:
(g) Liability defined.--Except as otherwise provided
in the regulations under section 752, an obligation is a
liability of the obligor of purposes of section 752 and
the regulations thereunder to the extent, but only to the
extent, that incurring or holding such obligation gives
rise to--
(1) The creation of, or an increase in,
the basis of any property owned by the obligor
(including cash attributable to borrowings);
(2) A deduction that is taken into
account in computing the taxable income of the
obligor; or
(3) An expenditure that is not
deductible in computing the obligor’s taxable
income and is not properly chargeable to
capital.
For reasons that are unclear, the final regulations under section
752 do not contain a definition of the term “liabilities”. See
sec. 1.752-1, Income Tax Regs.
In Rev. Rul. 95-26, 1995-1 C.B. 131, the Commissioner
addressed the question presented herein: Whether a partnership’s
short sale of securities creates a liability within the meaning of
section 752. The revenue ruling states that a partnership entered
into a short sale of securities on a national securities exchange.
The partnership’s broker-dealer took securities on hand and sold
them on behalf of the partnership. The partnership left the cash
Page: Previous 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 NextLast modified: May 25, 2011