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continues to be carried on by any of its partners in a
partnership.” Sec. 1.708-1(b)(1)(3)(i), Income Tax Regs. In
other words, the regulations indicate, a partnership is
terminated under section 708(b)(1)(A) only when the winding up of
its business affairs is completed and “all remaining assets,
consisting only of cash, are distributed to the partners”. Id.
The decided cases apply the statute similarly. Those cases
indicate that a nominal amount of continuing business or
financial activity precludes a partnership from terminating for
Federal tax purposes even when the partnership has abandoned or
discontinued its primary business activity. In Foxman v.
Commissioner, 41 T.C. 535 (1964), affd. 352 F.2d 466 (3d Cir.
1965), for example, a partnership sold its assets to a
corporation in which the partners were shareholders and received
in exchange two promissory notes. The Court held that the
partnership continued to exist after its asset sale in that it
held the notes received in the sale, collected interest on those
notes, and made minor purchases. Id. at 556-557. In Baker
Commodities, Inc. v. Commissioner, 415 F.2d 519 (9th Cir. 1969),
affg. 48 T.C. 374 (1967), the Court of Appeals for the Ninth
Circuit reached a similar result. There, the partnership’s
principal asset was a convalescent hospital that was closed and
then sold 9 months later in exchange for a note. The court cited
Foxman and held that the partnership’s sale of its asset did not
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