PNRC Limited Partnership v. Commissioner of Internal Revenue
United States Tax Court
66 T.C.M. (CCH) 265 (1993)
- Written by Kelly Simon, JD
Facts
PNRC Limited Partnership (PNRC LP) (plaintiff) was a partnership between Peter D. Carlino and PNRC Corporation. PNCR was wholly owned by Carlino Family Partnership, a limited partnership controlled by Carlino and his family. PNRC served as the general partner, and Carlino was the limited partner. The PNRC LP partnership agreement (the agreement) allocated 1 percent of losses to the PNRC and 99 percent of losses to Carlino. Additionally, the partnership agreement allocated 60 percent of profits to the general partner and 40 percent of profits to the limited partner. PNRC LP filed its income-tax return with an allocation of losses, consistent with the partnership agreement’s allocation of 99 percent of the losses to Carlino and 1 percent of the losses to PNRC. This allocation benefitted Carlino, who deducted the losses of PNRC LP from his personal income, thereby reducing his tax liability. PNRC reported no income and could not realize a tax benefit from the allocation of losses. The Commissioner of Internal Revenue (the commissioner) (defendant) determined that the allocation of losses between PNRC LP and Carlino was disproportionate and required adjustment. PNRC LP appealed to the United States Tax Court.
Rule of Law
Issue
Holding and Reasoning (Laro, J.)
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