- 15 -
* * * * * * *
• Satisfaction of obligations for interest,
principal payments and management fees by
transferring calves and culled cows will
constitute ordinary income to the investor
partnerships. This convention is consistent with
the Tax Court’s decision in Bales v. Commissioner,
which provides that
" calves are not section 1231(a) property; and
" although culled cattle are section 1231(a)
property, the gain on which may be long term
capital gain (depending on the holding
period), depreciation allowed must be
recaptured as ordinary income under the
provisions of section 1245.
* * * * * * *
• For all years after 1980, Management Company is
comprised of Mr. Hoyt, who is entitled to 15% of
the profits; and the 24 investor partnerships in
existence at December 31, 1981.
" The investor partnerships are each entitled
to 1/24 of the remaining 85% of the profits.
" The investor partnerships are each entitled
to 1/24 of 100% of any net losses.
• Each partner’s profit and loss sharing percentage
is determined annually by comparing the partner’s
capital account to the aggregate of the capital
accounts of all partners in the partnership. This
determination is made based on the total capital
owned, not the total capital originally
subscribed.
• Partners in the investor partnerships are divided
into two categories:
" Partners who continue to honor their note
obligations to Ranches, and who continue to
participate in the Hoyt Cattle partnership.
For purposes of this memorandum, will be
referred to as the “active partners.”
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011