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dissolution, or winding-up under State law, and a partnership may
continue to exist for Federal tax purposes even though State law
provides that the partnership has terminated, dissolved, or
wound-up. Fuchs v. Commissioner, 80 T.C. 506, 509-510 (1983);
Neubecker v. Commissioner, 65 T.C. 577, 581-582 (1975); see also
Maxcy v. Commissioner, 59 T.C. 716 (1973). When a partnership
terminates under Federal law, its taxable year closes on the same
date. Sec. 1.708-1(b)(3), Income Tax Regs.
For purposes of Federal tax law or, more specifically,
section 708(b)(1)(A), the date of termination is the date on
which the partnership winds up its affairs in cessation of its
business operation. Sec. 1.708-1(b)(3)(i), Income Tax Regs.
Whether a partnership has done so is a factual determination that
generally rests on an analysis of the various subsidiary elements
of proof. The regulations interpreting section 708(b)(1)(A)
establish a liberal approach to a finding of a business nexus
sufficient not to terminate a partnership. In accordance with
those regulations, a partnership continues to exist even when its
operations are substantially changed or reduced in a period of
winding up, and even when its sole asset during that period is
cash. Sec. 1.708-1(b)(1), (3)(i), Income Tax Regs. A
termination under section 708(b)(1)(A) occurs only when “the
operations of the partnership are discontinued and no part of any
business, financial operation, or venture of the partnership
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