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United States Tax Court
December 2, 2013, Filed
Docket Nos. 23756-11, 23757-11.
[*478] RUWE, Judge: Respondent issued a notice of final partnership administrative adjustment (FPAA) for the taxable year 2006 and an FPAA for the taxable year 2007 to Crescent Holdings, LLC (Crescent Holdings). Arthur Fields (petitioner), a partner other than the tax matters partner, filed petitions for readjustment of partnership items under [**3] section 6226.11 The cases were consolidated for trial, briefing, and opinion.
The issues for decision are: (1) whether petitioner should be treated as a partner owning a 2% interest in Crescent Holdings for purposes of allocating its profits and losses for the taxable years 2006 and 2007 (years at issue); and (2) if not, how the profits and losses attributable to the 2% interest should be allocated to the other partners.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by this reference.
At the time the petitions were filed, Crescent Holdings' principal place of business was in North Carolina.
Crescent Resources, LLC (Crescent Resources), was a Georgia limited liability company. Crescent Resources developed and managed commercial, residential, and multifamily real estate projects primarily in the Southeastern and Southwestern United States. Before September 7, 2006, Crescent Resources was wholly [**4] owned by Duke Ventures, LLC (Duke Ventures), a Nevada limited liability company. Duke Ventures was an indirect wholly owned subsidiary of Duke Energy Corp. (Duke Energy), a publicly traded company.
Petitioner joined Crescent Resources in 1987 as the vice president of real estate development. Petitioner signed an employment agreement with Crescent Resources on December 3, 1987, which was subsequently amended in 1994 and 1998. At some point in the 1990s petitioner became president of Crescent Resources and a member of the Duke [*479] Energy executive team. As a result of his position on the executive team, petitioner was allowed to participate in Duke Energy's nonqualified executive retirement plan.
In 2005 Duke Energy hired Morgan Stanley as a consultant to explore options to monetize the value of Crescent Resources. One of the proposed options was for Duke Energy to sell all or a part of its interest in Crescent Resources. Morgan Stanley informed Duke Energy that its hedge funds would be interested in purchasing a partial interest in Crescent Resources. Duke Energy agreed to sell a partial interest in Crescent Resources.
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
141 T.C. 477 *; 2013 U.S. Tax Ct. LEXIS 35 **; 141 T.C. No. 15
CRESCENT HOLDINGS, LLC, ARTHUR W. FIELDS AND JOLEEN H. FIELDS, A PARTNER OTHER THAN THE TAX MATTERS PARTNER, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Prior History: Crescent Res. Litig. Trust v. Fields (In re Crescent Res., LLC), 2012 Bankr. LEXIS 843 (Bankr. W.D. Tex., Mar. 2, 2012)Crescent Res. Litig. Trust v. Duke Energy Corp., 500 B.R. 464, 2013 U.S. Dist. LEXIS 143726 (W.D. Tex., Oct. 4, 2013)
partnership, allocated, Intervenor, distributions, partnership capital, vested, forfeiture, partner, transferor, argues, partnership profits, capital interest, taxable year, purposes, partnership interest, substantial risk, taxpayer, fair market value, forfeited, liquidation, becomes, profits, contributions, regulation, Formation, limited liability company, exchange for services, capital contribution, nonvested, service provider
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