- 40 -
the partnership, it is also “substantial” within the meaning of
section 1.704-1(b)(3)(iii), Income Tax Regs.6
The Facts and Circumstances Regulations
Both parties have made alternative arguments based upon the
broad factors enumerated in the regulations as appropriate for
consideration in resolving issues of partners’ interests. The
relevant regulations provide that “The determination of a partner’s
interest in a partnership shall be made by taking into account all
facts and circumstances relating to the economic arrangement of the
partners.” Sec. 1.704-1(b)(3)(i), Income Tax Regs. Because of our
holding with respect to the comparable liquidation test, there is
no need to revisit the "facts and circumstances" issue.
Deficiencies After Remand
Respondent, in his brief on remand, presented an issue that is
not directly related to inclusion of the minimum gain chargeback in
the comparative liquidation test. Respondent maintains that the
recalculated deficiencies should include a correction to the
decision submitted by the parties as a basis for the earlier
decision. That correction concerns the treatment of an asserted
6 The comparative liquidation test also requires that
the result of the liquidations be adjusted for the items
described in (4), (5), and (6) of sec. 1.704-1(b)(2)(ii)(d),
Income Tax Regs. See sec. 1.704-1(b)(3)(iii)(b), Income Tax
Regs. Respondent asserts that these provisions, described under
the “alternate test” of economic substance, supra, are
inapplicable here. Petitioner does not disagree.
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