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Petitioners contend that they may defer all of their gain
from the sale of the Hoefgen Avenue property because they bought
replacement properties that qualify under section 1033.
Respondent contends that petitioners used proceeds from the
Hoefgen Avenue sale to buy interests in partnerships and not in
real property. Petitioners contend that petitioner and Burnett
bought the Babcock Road and Warfield Drive properties, then
decided to form a joint venture to manage them. We disagree with
petitioners.5
2. Whether Petitioner Acquired an Interest in the Babcock
Road and Warfield Drive Properties, or an Interest in
Partnerships
Petitioners contend that petitioner and Burnett acquired an
interest in and held the Babcock Road and Warfield Drive
properties in fee simple as tenants in common. Petitioner and
Burnett testified that they did not intend to form partnerships
until after they bought the real property. However, we give more
weight to the objective facts than to that testimony. The
objective facts, such as the written agreements and petitioner’s
and Burnett’s conduct, show that petitioners formed a partnership
under Texas and Federal law, that the partnerships acquired the
5 In light of our conclusion, we need not decide
respondent’s contention that the rule stated in Commissioner v.
Danielson, 378 F.2d 771, 775 (3d Cir. 1967), vacating and
remanding 44 T.C. 549 (1965) (the Danielson rule), precludes
petitioners from claiming that their interests in the Babcock
Road and Warfield Drive properties are not partnership interests.
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