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Abramson v. Commissioner
United States Tax Court
86 T.C. 360 (1986)
Abramson and several others (collectively, the partners) (plaintiffs) were partners in Surhill Company, a limited partnership. Abramson and his wholly owned corporation, Creative Film Enterprises, Inc. (Creative) were general partners in Surhill, and the other investors were limited partners. The general partners contributed a total of $3,333 to Surhill and were entitled to 1 percent of its profit and loss, and the limited partners contributed a total of $330,000 to Surhill and were entitled to 99 percent of its profit and loss. In 1976 Surhill purchased the United States’ rights to an Italian film, Submission, for $1,750,000, paid with $225,000 in cash and a $1,525,000 nonrecourse promissory note. According to the terms of the promissory note, each of Surhill’s partners was personally liable for a pro rata share of the note. The partners increased their respective bases in the partnership according to their pro rata shares of the nonrecourse promissory note and claimed losses on their income-tax returns in accordance with the adjusted bases. The Commissioner of Internal Revenue (the Commissioner) (defendant) disallowed the loss deductions and argued that the partners were not entitled to adjust their bases according to their liabilities for the nonrecourse debt. The partners petitioned the United States Tax Court for a redetermination.
Rule of Law
Holding and Reasoning (Whitaker, J.)
Concurrence (Swift, J.)
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