Terry Nathan Norman - Page 5

                                        - 4 -                                         
               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               






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011