Holbrook v. Commissioner
United States Tax Court
34 T.C.M. 1283, T.C. Memo 1975-294 (1975)
- Written by Matthew Celestin, JD
Facts
W. D. Holbrook and M. D. Childers (the partners) (plaintiffs) were limited partners in a venture. The partners took ordinary deductions of the partnership’s operating losses, reducing their bases over time. The partners subsequently sold their partnership interests to the general partner for a price equivalent to their original investments. To the extent that the purchase prices exceeded the partners’ adjusted bases, the partners treated the gains as capital gains. However, the Commissioner of Internal Revenue (the Commissioner) (defendant) argued that the portion of the sales proceeds that exceeded the partners’ adjusted bases should be treated as recovery of partnership losses and therefore taxed as ordinary income pursuant to the tax-benefit rule.
Rule of Law
Issue
Holding and Reasoning (Irwin, J.)
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