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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entitled to the withdrawn funds.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
appeal.
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.
OPINION
LARO, Judge: This case is a partnership proceeding subject
to the unified audit and litigation procedures of the Tax Equity
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