Salina Partnership LP - Page 45




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          partners were entitled to increase their outside bases by a pro             
          rata share of the $80x of liabilities for construction costs that           
          the partnership incurred in 1971 in generating the progress                 
          payments.                                                                   
               In Helmer v. Commissioner, supra, the taxpayers were partners          
          in a partnership that had entered into an agreement granting a              
          third party an option to purchase real estate in which the                  
          partnership held a two-thirds interest.  During the term of the             
          option agreement, the partnership retained the right to possess and         
          enjoy profits from the property in question, and there was no               
          provision in the option agreement for repayment of the amounts paid         
          under the agreement should the agreement terminate.                         
               During the years in issue, the taxpayers received payments             
          directly from the third party pursuant to the option agreement--            
          amounts that the partnership listed as distributions to the                 
          taxpayers on its books and tax returns.  During the years in issue,         
          the taxpayers received partnership distributions, and had the               
          partnership pay personal expenses, in excess of their adjusted              
          bases in the partnership.  The Commissioner determined that,                
          although the option payments qualified as deferred income at the            
          partnership level, the taxpayers nevertheless were subject to               
          income tax to the extent that they had received distributions from          
          the partnership in excess of their adjusted bases in their                  
          partnership interests.  In response, the taxpayers argued that              






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Last modified: May 25, 2011