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Parmentier’s contribution of his 98-percent interest in Andantech
to RD Leasing in exchange for RD Leasing’s preferred stock caused
a deemed termination of the partnership. (For convenience, we will
refer to the partnership prior to the deemed termination as
Andantech-Foreign.)
If the sale or exchange of a partner’s interest in the
partnership results in the deemed termination of the partnership,
then pursuant to section 708(b)(1)(B), the partnership’s taxable
year is deemed closed upon the triggering sale or exchange. Sec.
706(c)(1). Consequently, if as petitioners assert the partnership
and the sale of the rent receivables are to be respected,
Andantech-Foreign’s taxable year is deemed closed on December 10,
1993, the date Mr. Parmentier exchanged his 98-percent interest in
the partnership for the preferred stock, and Andantech-Foreign is
required to include the income from the sale of the Comdisco rents
on its return for the 12/10/93 short period. That income would
then pass through to Messrs. Parmentier and de la Barre
d’Erquelinnes/EICI.
4. Section 894 provides that, to the extent required by any
treaty obligation of the United States, income (of any kind) is
exempt from U.S. taxation and excluded from gross income. Here,
petitioners assert that any income from the sale of the Comdisco
rents that passes through to Messrs. Parmentier and de la Barre
d’Erquelinnes would be exempt from U.S. taxation pursuant to the
treaty between the United States and Belgium. Further, petitioners
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