Estate of Melvin W. Ballantyne, Deceased, Jean S. Ballantyne, Independent Executrix, and Jean S. Ballantyne - Page 25

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          is allocated.”  Sec. 1.704-1(b)(3)(i), Income Tax Regs.  All                
          facts and circumstances relating to the economic arrangement of             
          the partners are taken into account.  Id.  The following factors            
          are considered relevant in determining a partner’s interest in              
          the partnership:  (1) The partners’ relative contributions to               
          capital; (2) the partners’ interests in economic profits and                
          losses; (3) the partners’ interests in cashflow and other                   
          nonliquidating distributions; and (4) the rights of the partners            
          to distributions of capital upon liquidation of the partnership.            
          Sec. 1.704-1(b)(3)(ii), Income Tax Regs.                                    
               The first factor to consider is the partners’ relative                 
          contributions to capital.  Melvin and Russell formed BBP in 1943,           
          and the partnership became involved in an oil and gas activity              
          and a farming activity.  In general, Melvin paid the expenses               
          related to the oil and gas activity, while Russell did the same             
          with respect to the farming activity.  Many of the assets used by           
          BBP in its activities were not held in the partnership’s name.              
          Rather, these assets were either jointly owned by Russell and               
          Melvin or individually owned by one of them.  During its                    
          existence, BBP did not maintain a general ledger, a balance                 
          sheet, a sales journal, or a purchases journal.  BBP did not                
          always maintain a cash disbursements journal or a cash receipts             
          journal.  Partnership capital accounts for BBP were never                   
          maintained.  A calculation of each partner’s capital                        

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