Quick’s Trust v. Commissioner
United States Tax Court
54 T.C. 1336 (1970)
Facts
George Quick and G. J. Maguolo were partners in an architectural and engineering-services firm. The partnership stopped doing business except for collecting accounts receivable three years before Quick died. The amount of outstanding receivables remained substantial and had a zero basis. Quick’s estate became Maguolo’s partner for five years, followed by Quick’s Trust (plaintiff). When Quick died, the partnership elected to adjust the basis of partnership property and increased the basis in the receivables from zero to about half face value, which substantially reduced the partnership’s taxable income when collecting receivables. In the sixth year, the tax commissioner assessed five years of deficiencies, claiming the partnership could not adjust the basis of a right to receive income in respect of a decedent. The commissioner emphasized that the accounts receivable represented money Quick earned performing personal services that would have been taxable as income to Quick during his lifetime if he were an accrual-basis taxpayer, or to his estate and his trust if he were a cash-basis sole proprietor. Likewise, if the business were a corporation, collections of receivables would have been fully taxable despite Quick’s death. Quick’s Trust petitioned the tax court for review.
Rule of Law
Issue
Holding and Reasoning (Tannenwald, J.)
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