Dynadeck Rotary System, Ltd. v. Commissioner of Internal Revenue

MEMORANDUM *

Appellants Martin Lettunich and Dyna-deck Rotary Systems, Ltd. (“the partnership”) appeal a decision of the Tax Court affirming adjustments to partnership tax items for the 1991 and 1992 tax years. At issue is whether a $400,000 loan undertaken by one of the partners, Dynadeck Inc., should be considered a liability of the partnership.

In the Tax Court, the parties entered into a stipulation of settled issues. They agreed that the sole issue to be adjudicated was whether there was an outstanding partnership debt during 1991 and 1992 that would allow the partners to increase their bases in the partnership. The case was submitted without trial on the basis of a fully stipulated record, and the Tax Court affirmed the Commissioner’s determination that the partnership was not liable for any part of the $400,000 debt.

Evidence in the record indicates only that the loan was intentionally made to the corporation, not to the partnership, and does not indicate that the corporation was acting as an agent of the partnership when it signed the promissory note. The note and all surrounding correspondence reference only the corporation; the parties awaited the incorporation of the…