Academic journal article Journal of Accountancy

Ordinary Loss Allowed Limited Partner Who Abandoned Interest

Academic journal article Journal of Accountancy

Ordinary Loss Allowed Limited Partner Who Abandoned Interest

Article excerpt

The Tax Court recently allowed Philip Citron, a limited partner who abandoned his partnership interest, an ordinary loss. Central to this favorable decision was the partnership's lack of liabilities.

Citron, a doctor, became a limited partner in Vandom, a film production partnership, by paying $60,000 in cash in 1980. In 1981, after the film was completed, a dispute arose with a producer. At a meeting later that year, the general partner told the limited partners that because of this dispute the only way Vandom could make money was if the limited partners contributed more funds and an X-rated film was made from the partnership's working print.

Citron told the general partner at that meeting that he would not contribute more money or be involved with an X-rated movie and that he wanted nothing further to do with Vandom. The limited partners then voted to dissolve Vandom. Vandom's CPA was told the partnership would have no further activity or income and the investment should be completely written off; he was asked to prepare a final tax return. Vandom had no liabilities at the end of 1981. …

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