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Government’s argument that a partnership terminates upon the
abandonment of its primary purpose, stating:
Subparagraph (A) of Section 708(b)(1) provides
that a partnership is terminated if ‘no part of any
business, financial operation, or venture of the
partnership continues to be carried on by any of its
partners in a partnership’ (emphasis added). There is
nothing to indicate that this provision requires less
than what it says--a complete cessation of all
partnership business--and therefore we cannot accept
the Government’s contention that a partnership is
terminated if it abandons just its ‘primary purpose.’
See David A. Foxman, 41 T.C. 535, 557 (1964), aff’d,
352 F.2d 466 (C.A. 3, 1965) (no termination even though
‘these items were of comparatively minor character in
contrast to the enterprise previously carried on’);
James v. United States, 63-1 U.S.T.C. 9478, at 88307,
88309 (M.D. Ga. 1963); cf. Treas. Reg. � 1.708-1(b)(1).
[Id. at 988.]
The Court of Claims also stated that “the fact that the
partnership continued to hold the property for a business
purpose--investment–-might well be an adequate showing that it
was not sufficiently inoperative to evoke the termination
provision of Section 708(b)(1)(A).” Id.; accord Yagoda v.
Commissioner, 39 T.C. 170, 182-183 (1962) (partnership that
ceased its business and existence in 1945 was not terminated for
Federal income tax purposes until 1947, when it finished winding
up its affairs), affd. 331 F.2d 485 (2d Cir. 1964); Hoagland v.
Commissioner, T.C. Memo. 1971-310 (partnership did not terminate
as a result of cessation of business where the land development
business for which it was originally formed was frustrated and
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