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trust that decedent did not have enough income to pay her
expenses. By April 1997, the trustee of the 1954 trust had
distributed $68,214 to decedent and terminated the trust.
Although decedent’s financial needs prompted the distribution of
the funds from the 1954 trust, decedent gave $22,000 to Mr.
Bigelow and his wife in 1997. When she died, decedent had only
$8,505 of liquid assets left to supplement her inadequate monthly
income; i.e., $5,417 of assets held in decedent’s trust, $169 due
from Boston Co., and $2,919 in a savings account.
2. Failure To Respect Partnership Formalities
The parties’ failure to respect the provisions of the
agreement governing their transaction tends to show that the
transaction was not entered into in good faith. See Estate of
Harper v. Commissioner, T.C. Memo. 2002-121; Riverpoint Lace
Works, Inc. v. Commissioner, T.C. Memo. 1954-39.
The estate points out that formalities to establish the
partnership were met and contends that any lapses in complying
with partnership formalities after formation were unimportant.
We disagree. Spindrift did not properly maintain records of
partnership capital or the partners’ capital accounts. The
balance sheets included in the 1995-97 returns incorrectly show
the Great Western Bank loan as a liability of the partnership.
None of the partners’ Schedules K-1 accurately reflect the
partners’ capital accounts; e.g., decedent’s capital account
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