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no realistic possibility that the partnership was going to
acquire additional assets.36 In these circumstances, the
partnership’s liability on the debt was effectively limited to
the project assets that collateralized the indebtedness, and the
partners’ liabilities were effectively limited to their interests
in those project assets. In these circumstances, the debt was in
substance nonrecourse against the partnership and the partners.
We do not believe that the partners should be considered to have
had any personal liability for the partnership’s debt within the
meaning of the then-applicable regulations.37
This conclusion is consistent with the manner in which the
partnership treated the debt on its 1987 Form 1065. The
partnership reported disposing of the project assets in a
“partial foreclosure sale” on November 2, 1987. The partnership
treated the $1 billion foreclosure sale price as “the amount of
the taxpayer’s nonrecourse indebtedness that was discharged as a
result of the disposition of certain assets by the foreclosure
36 Under the partnership agreement, partners were required
to make capital contributions to the partnership only as directed
by the management committee for the purpose of purchasing project
assets and paying project costs and other costs incurred by the
partnership. The partners were prohibited from making voluntary
contributions to the partnership. The record does not suggest
the partnership ever acquired additional assets after the project
assets were transferred to DOE.
37 Petitioner has not raised, and accordingly we do not
consider, any argument that the partnership’s debt should be
considered recourse by virtue of ANRC’s pledge of its ANG stock.
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