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agreement does not give the limited partners the ability to
effect a section 754 election, in this case the election would
have to be made by the general partner.
Elliott opined that a hypothetical buyer would demand a
discount for built-in gains. He acknowledged in his report a 75-
to 80-percent chance that an election would be made and that the
election would not create any adverse consequences or burdens on
the partnership. His opinion that the election was not certain
to be made was based solely on the position of A.C. Jones,
asserted in his trial testimony, that, as general partner, he
might refuse to cooperate with an unrelated buyer of the
83.08-percent limited partnership interest (i.e., the interest he
received as a gift from his father). We view A.C. Jones’
testimony as an attempt to bootstrap the facts to justify a
discount that is not reasonable under the circumstances.
Burns, on the other hand, opined, and respondent contends,
that a hypothetical willing seller of the 83.08-percent interest
would not accept a price based on a reduction for built-in
capital gains. The owner of that interest has effective control,
as discussed above, and would influence the general partner to
make a section 754 election, eliminating any gains for the
purchaser and getting the highest price for the seller. Such an
election would have no material or adverse impact on the
preexisting partners. We agree with Burns.
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