- 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 cashPage: Previous 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 Next
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