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The agreement provides that petitioner shall receive
distributions from PTSI in proportion to his participation
percentage. Petitioner also is entitled to a “Preferred Return”,
which the agreement defines as “an amount equal to 10% annually,
cumulative and non-compounded, on each Partner’s Adjusted Capital
Account”. As is relevant here, the term “Adjusted Capital
Account” means a partner’s contributions to PTSI less any amounts
distributed to him. Petitioner reviewed the agreement with his
attorney before he signed it.
A partnership “includes a syndicate, group, pool, joint
venture, or other unincorporated organization through or by means
of which any business, financial operation, or venture is carried
on, and which is not * * * a corporation or a trust or estate.”
Sec. 761(a). To determine whether a partnership exists, we
consider whether, in light of all the facts, the parties in good
faith and acting with a business purpose intended to join
together in the present conduct of an enterprise. Commissioner
v. Culbertson, 337 U.S. 733, 742 (1949); Allum v. Commissioner,
T.C. Memo. 2005-177.
The agreement indicates that petitioner and the corporation
intended to form a partnership, and that petitioner’s $100,000
investment was a contribution of capital in exchange for a
partnership interest. Petitioner, however, believes that the
agreement created a creditor-debtor relationship and that the
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Last modified: May 25, 2011