Harbor Cove Marina Partners Partnership, Robert A. Collins, A Partner Other Than The Tax Matters Partner - Page 2

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               to compel S to abide by the partnership agreement, and                 
               deposited with the trial court the check that P had                    
               received from H.  In 2000, the trial court declared                    
               that the partnership agreement required that S sell the                
               marina publicly to the highest bidder, but decided that                
               P’s sole remedy for S’s violation of that agreement was                
               to withdraw the funds on deposit.  P withdrew those                    
               funds shortly thereafter.  In 2002, upon appeal of the                 
               trial court’s judgment, the court of appeal ordered                    
               that the marina be sold and that the proceeds be                       
               distributed in accordance with the partnership                         
               agreement.  In 2003, after the marina had been sold for                
               $25.5 million, but before any distribution of the                      
               resulting proceeds, the trial court decided upon remand                
               that P’s withdrawing of the funds formerly on deposit                  
               meant that the court of appeal’s order was without any                 
               legal basis and that the final judgment in P’s lawsuit                 
               was the trial court’s judgment stating that P was only                 
               entitled to the withdrawn funds.  The trial court’s                    
               latest decision is back on appeal before the court of                  
                    Held:  Pursuant to sec. 708(b)(1)(A), I.R.C., H                   
               did not terminate for Federal tax purposes during 1998;                
               as of the end of that year, H’s winding up of its                      
               affairs in complete cessation of its business operation                
               was dependent on the resolution of P’s lawsuit as to                   
               the failure of S to follow the procedures by which the                 
               partners of H had agreed that H’s operation would be                   
               terminated, and P’s lawsuit, when resolved, could have                 
               under the partnership agreement reasonably resulted in                 
               H’s realization of significant income, credit, gain,                   
               loss, or deduction after 1998.                                         

               W. Alan Lautanen, for petitioner.                                      
               Karen Nicholson Sommers, for respondent.                               


               LARO, Judge:  This case is a partnership proceeding subject            
          to the unified audit and litigation procedures of the Tax Equity            

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