Court Opinion

ID: 4484069
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:16:29.584724+00
Date Added: 2024-06-11T11:38:02.365382
License: Public Domain

Nims, J., concurring: While I agree with the result reached by the majority, I find troubling the implications of language in the opinion such as “while * * * there may have been no retroactive shifting of distributive shares in a strict sense,” and “The provision in the agreement for division of profits and losses among the owners of the units as of the end of the year was in accord, so far as we know, with the actual economic interest of the partners in the partnership.” It seems quite apparent that there was indeed a retroactive shifting of distributive shares. The effect of the December 30, 1971, amendment to the partnership agreement was to provide an automatic retroactive allocation to any limited partner admitted after the first day of any given partnership year. That is precisely what petitioners sought to achieve here. Furthermore, I find nothing in the findings of fact to support the assertion that the amendment comports with the economic interests of the partners. Why, for example, would any intelligent person buy into a partnership at the end of a year only to be saddled with a full year’s operating losses — except to obtain tax deductions? I find it puzzling indeed that the majority, while ostensibly following Moore v. Commissioner, 70 T.C. 1024 (1978), makes the statement that “the transfers of partnership interests in these years did not effect a retroactive redivision of the partnership profits and losses different from that provided in the agreement as amended.” As one might have assumed from Moore, the fact that the partnership agreement did, indeed, provide for retroactive allocations is irrelevant; rather, the mischief lies in the fact of the retroactive allocations themselves. It is also immaterial, though the majority -opinion implies the contrary, that the partnership agreement was amended in a year prior to those before the Court, rather than during or subsequent to those years; the problem remains the same. I would further reiterate that, as we demonstrated in Moore, the conceptual basis for the disallowance of retroactive allocations where new partners are admitted is the overlay of the assignment-of-income doctrine upon the mechanical contrivance here again postulated by the petitioners. Prior to the Second Circuit’s decision in Rodman v. Commissioner, 542 F.2d 845 (2d Cir. 1976), revg. on this issue T.C. Memo. 1973-277, and our decision in Moore, it had been argued, as petitioners argue, that sections 702(a), 704(a), and 761(c) reveal a legislative purpose to allow partners flexibility in determining inter se the incidents of their tax liability resulting from participation in a partnership; e.g., to allow retroactive allocations of losses to incoming partners. Moore v. Commissioner, supra at 1030. In Moore, we quoted the Supreme Court speaking in New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440-441, as follows: the taxpayer who sustained the loss is the one to whom the deduction shall be allowed. Had there been a purpose to depart from the general policy in that regard, and to make the right to the deduction transferable or available to others than the taxpayer who sustained the loss, it is but reasonable to believe that purpose would have been clearly expressed. And as the section contains nothing which even approaches such an expression, it must be taken as not intended to make such a departure. As we said in Moore v. Commissioner, supra at 1034, “the same observations are pertinent in the case before us. Subchapter K contains no clear expression of the intention to permit a partner to deduct losses which accrued prior to his entry into the partnership.” In my judgment, we should take no step now which would in any way give the impression that we have receded from that position. Dawson, Simpson, Wiles, and Chabot, JJ., agree with this concurring opinion.