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Timmy partnership at book value prior to the liquida-
tion of the partnership and that, as a result, the only
assets distributed to Mr. Ramsburg in liquidation of
the partnership consisted of the remaining balance in
the partnership checking account [Kildare Timmy bank
account balance] and the proceeds from the partner-
ship’s sale of the horses to Mr. Ramsburg. Under
�731(a)(2) of the Code, Petitioners therefore recog-
nized a loss on the distribution of the cash balance of
the checking account and the proceeds from the sale of
the horses. The fact that the fair market value of the
horses owned by the Kildare Timmy partnership was not
precisely determined does not change the fact that Mr.
Ramsburg recognized a loss on the receipt of the liqui-
dating distribution from the partnership. * * * Mr.
Stottlemeyer effectively received, in liquidation of
the partnership, a credit equal to his 50% share of the
assets of the partnership against his liability to Mr.
Ramsburg in the amount of $146,750.
In support of respondent’s position that section 469(g)(1)
does not permit petitioners to treat for 1998 petitioners’
passive losses attributable to Kildare Timmy as nonpassive
losses, respondent argues:
a taxpayer who disposes of an interest in a passive
activity may deduct suspended losses only if three
conditions are satisfied: (1) the taxpayer disposes of
his entire interest in the activity; (2) the disposi-
tion is in the form of a fully taxable transaction
(i.e., one in which the full amount of the gain or loss
inherent in the activity is recognized); and (3) the
person acquiring the interest is not related to the
taxpayer. I.R.C. � 469(g). The petitioners failed to
satisfy any of these conditions.
According to respondent,
24(...continued)
If petitioners do not intend to include Kildare Timmy’s stud
rights in their reference to the “horses” that Mr. Ramsburg
allegedly purchased from Kildare Timmy, petitioners must concede
that Kildare Timmy distributed to Mr. Ramsburg not only money but
also such stud rights in liquidation of his interest in that
partnership.
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