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their adjusted bases in their partnership interests should be
increased by their pro rata shares of the option payments, which
they characterized as partnership liabilities under section 752.
The Court agreed with the Commissioner that no liability
within the meaning of section 752 arose upon the partnership’s
receipt of the option payments. The Court noted that there were no
provisions in the option agreement for repayment of, or
restrictions on, the option payments. Further, the Court
emphasized that income attributable to the option payments was
subject to deferral at the partnership level due only to the
inability of the partnership to determine the character of the
gain, not because the partnership was subject to a liability to
repay the funds paid or to perform any services in the future.
We are not convinced that either Rev. Rul. 73-301, supra, or
Helmer v. Commissioner, T.C. Memo. 1975-160, provides a sound basis
for determining whether a short sale transaction generates a
partnership liability within the meaning of section 752. On the
one hand, both authorities stand for the general proposition that
amounts owed or paid to a partnership (or its partners) in a
transaction that qualifies as an open transaction for tax purposes
do not generate adjustments to the partners’ outside bases in their
partnership interests until the transaction is closed and the tax
characteristics of the transaction can be determined. On the other
hand, in Rev. Rul. 73-301, supra, the Commissioner recognized that
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