Life Care Communities of America, Ltd., A Florida Limited Partnership, Robert W. McMichael, A Partner Other Than The Tax Matters Partner - Page 4

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          purchase Smith and Fowler’s interests prior to September 30,                
          1989, Smith and Fowler would be obligated to purchase                       
          petitioner’s interest for $2,370,000.  By letter dated November             
          16, 1989, Smith and Fowler informed petitioner that they would              
          purchase his interest pursuant to the 1989 agreement.  No                   
          provision in the 1989 agreement, however, precluded petitioner              
          after January 12, 1989, from participating in the affairs of the            
          partnership.                                                                
               On June 30, 1990, petitioner, Smith, and Fowler executed a             
          purchase agreement (1990 agreement) providing for the transfer of           
          petitioner's interest to Smith and Fowler for $2,570,000.  The              
          1990 agreement recharacterized the $200,000 paid pursuant to the            
          1989 agreement as part of the purchase price.  The parties                  
          executed a $2 million promissory note with the balance of the               
          purchase price (i.e., approximately $370,000) to be paid at                 
          closing.                                                                    
               In 1990, petitioner sought a distribution to cover his 1989            
          tax liabilities relating to his distributive share of partnership           
          income.  Prior to 1989, the only distributions made to                      
          petitioner, Smith, and Fowler were to assist them in paying their           
          tax obligations resulting from their distributive shares of                 
          partnership income.  In 1989 and 1990, however, the partnership             
          used most of its income to make payments relating to its receipt            
          of a $20 million loan and made no distributions.                            






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