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to assume that a liability within the meaning of section 752 must
satisfy the definition of an indebtedness as that term is used
elsewhere in the Code.
Although petitioner asserts that Salina’s short sale of
Treasury bills did not result in a partnership liability within the
meaning of section 752, petitioner does not offer the Court a
definition of the term “liability” to support its position. As
previously indicated, the term “liability” is not defined in either
the Code or the Commissioner’s final regulations under section
752.12 In the absence of any indication that Congress intended
otherwise, we apply the term taking into account its plain and
ordinary meaning. See, e.g., Deputy v. du Pont, supra at 498.
Black’s Law Dictionary 925 (7th ed. 1999), defines the term
“liability” in pertinent part as follows:
1. The quality or state of being legally obligated
or accountable; legal responsibility to another or to
society, enforceable by civil remedy or criminal
punishment. * * * 2. A financial or pecuniary obligation
* * *.
Based upon the aforementioned meaning of the term “liability”,
and consistent with the policy underlining section 752, we hold
that Salina’s obligation to close its short sale by replacing the
Treasury bills that it borrowed from Goldman Sachs and ABN
represented a partnership liability within the meaning of section
752. In particular, as part and parcel of its short sale of the
12 Neither petitioner nor respondent argues that the
current regulations provide insight on the question presented.
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