- 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 thePage: 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