Estate of Melvin W. Ballantyne, Deceased, Jean S. Ballantyne, Independent Executrix, and Jean S. Ballantyne - Page 21

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          Income Tax Regs.  BBP does not meet requirements (1) and (2)                
          because BBP did not maintain any capital accounts.  Thus, the               
          proffered allocations fail the alternate test for economic                  
               Allocations which fail the economic effect test may be                 
          deemed to have economic effect if they pass the economic effect             
          equivalence test.  In Vecchio v. Commissioner, supra at 192, we             
                    Allocations made to a partner that do not                         
               otherwise satisfy the economic effect test,                            
               nevertheless, are deemed to have economic effect,                      
               provided that, as of the end of each partnership                       
               taxable year, a liquidation of the partnership at the                  
               end of such year or at the end of any future year would                
               produce the same economic results to the partners as                   
               would occur if all the requirements of the economic                    
               effect test had been satisfied, regardless of the                      
               economic performance of the partnership.  Sec. 1.704-                  
               1(b)(2)(ii)(i), Income Tax Regs.; see also Elrod v.                    
               Commissioner, 87 T.C. 1046, 1086 n.23 (1986). * * *                    
          None of the parties have argued or demonstrated that either of              
          the proffered allocations satisfies this economic effect                    
          equivalence test.                                                           
               As mentioned earlier, where the partnership agreement does             
          not provide as to a partner’s distributive share, or where the              
          partnership agreement provides for an allocation that does not              
          have substantial economic effect, a partner’s distributive share            
          is determined by the partner’s “interest in the partnership.”               
          Sec. 704(b).  As stated above, the allocations proposed by the              
          parties lack economic effect.  Thus, the gain from the grain                

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