In Uncategorized on 12/19/2016 at 17:10


This is a sad story. A partnership made money and this partner had a distributive share. But rather than take it and pay tax, he chose to let the partnership use the money to pay expenses. He claimed NY partnership law required him as a fiduciary to advance the interests of his fellow partners and not abandon them.

His tax advisers told him that, although unfair, he owed the tax. He said he was prepared to face the consequences.

Judge Gustafson can’t oblige as to letting him off the tax, but can oblige by letting him face the consequences.

He owes the tax and the five-and-ten chop. The capital contribution to the partnership adds to his basis, but isn’t deductible.

His attempt to shield his spouse is not on the table, as it’s for her to file innocent spousery.

Curious why, if the partnership was in such dire straits, he didn’t get his share of offsetting deductions. But there’s a Section 155 beancount to follow, so maybe there’s a silver lining.

And maybe if the partnership goes under he has a capital loss.

The case is Walter S. Mack, Jr. and Consuelo C. Mack, 2016 T. C. Memo. 229, filed 12/19/16.


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