- 45 - 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 thatPage: Previous 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 Next
Last modified: May 25, 2011