- 26 - 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.Page: Previous 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 Next
Last modified: May 25, 2011