# Appendix — Fike v. Commissioner

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1982
- **Citation:** 459 U.S. 1037

## Text

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APPENDIX “A”
CERTIFIED FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

ESTATE OF ERNEST D. SKAGGS, Deceased,
CAROLYN C. FIKE, EXECUTRIX, AND
CAROLYN C. FIKE, FORMERLY

CAROLYN C. SKAGGS,

Plaintiffs and Respondents,
vs.

COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appeliee

CA NO. 81-7058
TAX No. 6546-78

OPINION

COURT OF APPEALS
FOR THE NINTH CIRCUIT

APPEAL from the Decision of the United States Tax Court
Argued and submitted February 9, 1982

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Before: FARRIS, FERGUSON and NELSON, Circuit Judges
PER CURIAM:

Petitioners appeal the Tax Court’s decision that absent a
timely election under 1LR.C. § 754, the bases of the partnership
assets could not be adjusted on the death of a partner under
LR.C. § 1014 (a) and (b) (6) until the partnership was terminated.
The petitioners contest the Tax Court's ruling that the death of a
partner does not, in and of itself, serve to terminate the

|. FACTS

Ernest Skaggs, decedent, and Carolyn C. Skaggs, his
widow, conducted a farming business as equal partners in a two-
member partnership known as the Santa Rita Ranch Company.
They owned their respective capital interests in the partnership
as community property. The partnership agreement provided
that the partnership would terminate upon the death of either
partner. The agreement also provided that, in such a case, the
estate of the deceased partner could determine whether the
partnership should elect to adjust the bases of the partnership
assets under section 754 of the LR.C.

The husband died on December 31, 1973, the last day of the
partnership’s 1973 tax year. Community property, including
their respective partnership interests, became subject to
probate administration. The wife was the sole beneficiary under
the husband's will and was appointed executrix of his estate. No
Section 754 election was filed by the partnership. Subsequent to
December 21, 1973, the wife exercised full management control
over the business. The debts outstanding as of December 31,

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1973, were paid from subsequent crop income and collection of
accounts receivable during the period between January 10, 1974
and September, 1974.

In their 1974 tax returns, the wife and the estate of her
husband each reported one-half of the income and expenses
derived from the farming operation in that year. In so doing, they
assigned stepped-up basis, under § 1014 of the LR.C., to the
crops sold and depreciable assests used in the business to reflect
the fair market value of those items on the date of decedent’s
death. This had the effect of reducing the federal income tax for
1974 by $110,113 for the wife and $151,858 for the estate. The
Commissioner disallowed the adjustment and the Tax Court
affirmed.

The Tax Court's findings of fact and inferences drawn from
those facts will be upset on appeal only if clearly erroneous, the
appellant having the burden of showing such clear error. Geneva
Drive In Theatre, Inc. v. C.LR., 622 F.2d 995 (9th Cir. 1980). Due
to its special expertise, the Tax Court’s determination should
not be overruled unless some unmistakable question of law
mandates such a decision. Sibla v. C.LR., 611 F.2d 1260 (9th Cir.
1980).

The petitioners argue that the partnership was terminated
on December 31, 1973, the date of the husband’s death. In a
thorough opinion the Tax Court fully considered the petitioners
arguments. See Estate of Skaggs v. Commissioner, 75 T.C. 191
(1980). Section 708 of the Code and Treasury Regulation 1.708-1
define when a partnership is terminated for federal income tax

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purposes.' Under the regulations, a partnership does not
terminate for tax purposes until the winding up of the
partnership affairs have been completed. Further, the
regulations indicate that the death of a partner does not
necessarily terminate a partnership. Treas. Reg. § 1.708-
1(b)(1)(i) and (iia). The Tax Court found that although the
partnership was dissolved on December 31, 1973, the process of
terminating the partnership continued into 1974. Id. at 196. It
concluded that absent a timely election under .R.C. § 754, the
bases of the partnership assets could not be adjusted on
December 31, 1973.

We affirm.

'Treas. Reg. § 1.708-1, Continuation of partnership.

(a) General rule. For purposes of subchapter K, chapter 1 of the Code,
an existing partnership shall be considered as continuing if it is not
terminated.

(b) Terminatior — General rule. (i) A partnership shall terminate when the
operations of the parinership are discontinued and no part of any business,
financial operation, or venture of the partnership continues to be carried on by

any of its partners in a partnership... [WJhere partners DEF agree on April 30,

1957, to dissolve their partnership, but carry on the business through a winding
up period ending September 30, 1957, when all remaining assets, consisting
only of cash, are distributed to the partners, the partnership does not terminate
because of cessation of business until September 30, 1957.

(a) Upon the death of one partner in a 2-member partnership, the
partnership shall not be considered as terminated if the estate or other
successor in interest of the deceased partner continues to share in the profits
or losses of the partnership business.

(ii) For purposes of subchapter K, chapter 1 of the Code, a partnership
taxable year closes with respect to all partners on the date on which the
partnership terminates.

The date of termination is:
(a) For purposes of section 708(b)(1)(A), the date on which the winding up of
the partnership affairs is completed.

i. oe
-

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

ESTATE OF ERNEST D. SKAGGS, Deceased,
CAROLYN C. FIKE, EXECUTRIX, AND
CAROLYN C. FIKE, FORMERLY
CAROLYN C. SKAGGS,

Petitioner-Appellant,

o

vs.

COMMISSIONER OF INTERNAL REVENUE,

Respondent-Appellee.

No. 81-7058
ORDER AMENDING OPINION
AND
DENYING REHEARING

COURT OF APPEALS
FOR THE NINTH CIRCUIT
FILED

MAY 27, 1982
PHILLIP B. WINBERRY, Clerk

By

; Deputy
Before: FARRIS, FERGUSON, and NELSON, Circuit Judges.

The opinion filed in the above matter on March 24, 1982, is
amended as follows:

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At page 1265, right hand column, after “December 31,
1973,” add footnote 2:

2Our review is limited to these facts where a husband and
wife executed a formal partnership agreement. The Tax
Court decision and this decision neither deal with nor a»ply to
an ordinary community property situation not invo'ving a
formal partnership agree: ,ent.

The panel as constituted above has voted to deny the
petition for rehearing and to reject the suggestion for rehearing
en banc.

The full court has been advised of the suggestion for
rehearing en banc, and no judge of the court has requested a
vote on it. Fed. R. App. P. 35(b).

The petition for rehearing is denied and the suggestion for
rehearing en banc is rejected.

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OPINION OF THE UNITED STATES TAX COURT

ESTATE OF ERNEST D. SKAGGS, Deceased,
CAROLYN C. FIKE, EXECUTRIX, AND
CAROLYN C. FIKE, FORMERLY

CAROLYN C. SKAGGS,

vs.

COMMISSIONER OF INTERNAL REVENUE,

ited
Docket No. 6546-78. Filed October 30, 1980.

Held, unless a timely election was made under sec. 754,
LR.C. 1954, the bases of the assets of a California husband-wife
partnership were not adjusted on the death of the husband
under sec. 1014(a) and (b)(6), LR.C. 1954, even though the bases
of the interests of the respective partners were adjusted and
both the deceased husband’s interest and the surviving wife’s
interest were administered pursuant to State law under the
supervision of the local superior court. Held, further, a
purported election under sec. 754, 1 R.C. 1954, to have the bases
of the assets of tle partnership adjusted for the calendar year
1973, made in the patition filed in the instant case, is not effective.

Philip H. Wile, for the petitioners.
Henry E. O’Neill, for the respondent.
OPINION
FEATHERSTON, Judge: Respondent determined

deficiencies in petitioners’ Federal income tax for 1974 as
follows: |

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Petitioner Deficiency
Estate of Ernest D. Skaggs ...... $151,858
Carolyn C. Fike .............05- 110,113

Due to concessions by petitioners, the following issues
remain for decision:

(1) Whether certain assets held by a partnership, whose
members, Ernest D. Skaggs and his wife, Carolyn (now Carolyn
C. Fike), held their partnership interests as community
property, were acquired from or passed from a decedent upon
Ernest D. Skaggs’ d »th so that the bases of the assets of the
partnership were then adjusted under section 1014(a)' and
(b)(6).

(2) If the bases of the assets were not adjusted at Ernest D.
Skaggs’death, whether Carolyn C. Fike in the petition filed in the
instant case made a valid election under section 754 to permit an
adjustment in the bases of those assets pursuant to sections
743(b) and 755. .

When the petition was filed, Carolyn C. Fike (petitioner),
who has filed this action in her individual capacity and 1s
executrix of the Will of Ernest D. Skaggs (Ernest), was a legal
resident of Raymond, Calif. She filed 1974 Federal income tax
returns for herself and for the estate with the Director, Fresno
Service Center, Fresno, Calif.

Before his death on December 31, 1973, Ernest and
petitioner, husband and wife, conducted a farming business as
equal partners in a two-member partnership known as Santa
Rita Ranch Co. (the partnership). They owned their capital
interests in the partnership as community property. The

1All section references are to the Internal Revenue Code of 1954, as in
effect during the tax year in issue, unless otherwise noted.

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partnership maintained its records on the basis of a calendar
year.

A written memorandum of partnership agreement was
executed on April 22, 1967, and effective as of January 1, 1967.
The partnership agreement (in article 8) provided that the
partnership of Ernest and petitioner was to “terminate” on the
death of either partner. It further provided (in article 10):

In the event of the death of either partner at a time when the
partnership shall not have already made the election provided in
Section 754 of the Internal Revenue Code, as amended, to adjust the
basis of the partnership property, the estate of such deceased partner
shall be entitled ¢~ determine whether the partnership shall inake such

Prior to December 31, 1973, the partnership was engaged in
farming 1,736 acres of land in Merced County, Calif., producing
cotton, corn, sugar beets, alfalfa, and other annual crops. The
land was leased by the partnership under an oral lease from
Lillian Christiana. In July 1973, the partnership assumed control
over the operation of certain property known as the “Raymond
Ranch.” This property was used primarily as grazing land under
contractual arrangements with various cattle owners who were
permintted to graze their cattle on the property for prescribed
fees.

As of December 31, 1973, when Ernest died, the partnership
owned certain depreciable assets and certain crops. At that
time, the partnership held 435 bales of harvested but unsold
cotton, a sugar beet crop, then estimated at 11,550 tons, which
was in the ground subject to harvest in the spring of 1974, and
accounts receivable for corn and milo harvested and delivered
but not yet paid for by purchasers. The partnership was heavily

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indebted to the Bank of America for crop loans in the amount of
$158,000 to cover the cost of producing 1973 crops which had
not yet been sold or for which sales proceeds had not yet been
collected. Additional debts in the amourit of $47,687.14 were
outstanding. To realize proceeds trom the crop assets and to
repay the bank loan, it was essential that business operations
conducted by the partnership prior to December 31, 1973, be
continued for the purposes of collecting the receivables, selling
unsold crops, and harvesting and selling the beet crop.

No notice of dissolution of the partnership was published in
any newspaper. Nor was any affidavit showing the publication of
such a notice filed with the county clerk.

All of the community property owned by Ernest and
petitioner at the date of his death, including both the partnership
interest of Ernest and that of petitioner, became subject to
probate administration in the Merced County Superior Court
(hereinafter the Superior Court). Under Ernest’s will, which was
admitted to probate on February 4, 1974, petitioner was
authorized to carry on the farming business owned by the
partnership. On February 28, 1974, as executrix, she filed a
petition with the Superior Court seeking authority to continue
the farming operation, and her petition was granted on March
15, 1974. From December 31, 1973, as executrix, petitioner
and operations. She completed the sale of crops produced in
1973, collected the proceeds from the sale of those crops,
handled the production and sale of crops maturing in 1974, and
began preparations for the production of 1975 crops. The debts
outstanding as of December 31, 1973, were paid from crop
income and from collection of accounts receivable or were
otherwise discharged during the period beginning January 10,

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1974, and ended September 1974.

On November 7, 1974, Santa Rita Farms, Inc., was
incorporated, and the corporation leased the farm property
which had been leased and operated by the partnership. The
lease to the corporation preserved for “the pnur tenant” the right
to harvest crops still growing on the land on November 7, 1974.
The corporation paid Ernest’s estate $70,000 to reimburse it for
expenses paid with respect to future crops not ready for harvest
on November 8, 1974. The farming business conducted under
petitioner’s supervision was continued to complete the harvest
and sale of the crops not conveyed to the corporation and to pay
expenses incurred in the business.

On December 6, 1974, petitioner acquired 500 shares of the
capital stock of Santa Rita Farms, Inc., all of the shares issued
prior to February 27, 1975. Before February 10, 1975, all
obligations of the farming business had been discharged. On
February 27, 1975, she acquired an additional 15,000 shares in
exchange for certain equipment and additions to rented farm
labor houses, all of which was used in the farming business of the
partnership before Ernest’s death. These items were distributed
to petitioner in her individual capacity from the estate pursuant
to court order on February 26, 1975.

Federal and State income tax returns for the partnership
were filed for 1973. Pursuant to advice of counsel, no further
partnership returns were filed for the partnership and no election
under section 754 was filed on any return. No application for an
extension of time for filing either the 1973 partnership return or a
section 754 election was ever made.

The estate and petitioner filed 1974 Federal income tax
returns, each of which reported one-half of the 1974 collections
and crop income. In reporting income derived from the sale of

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crops during 1974, new bases were claimed by the estate and by
petitioner in an amount equal to the fair market value of the
crops on hand as of December 31, 1973. The claimed bases
represented a total increase of $415,936 over the bases of the
same assets in the hands of the parinership prior to December
31, 1973. No basis was claimed with respect to the accounts
receivable.? Depreciation deductions claimed by Ernest’s estate
and petitioner for the period of the continued operation of the
farming business were computed on an amount equai to the fair
market value of the depreciable assets as of December 31, 1973.

In the notices of deficiency issued to petitioner and to
Ernest’s estate, respectively, respondent made the following
determination:

The deduction of $207,968.00 claimed as basis in growing crops is

not allowed because it has not been established that you acquired such
assets from the decedent within the provisions of section 1014 of the
Internal Revenue Code of 1954. Accordingly, your taxable income is
increased by $207,968.00.
Due to this denial of the claimed adjustment in basis, respondent
also disallowed a portion of the depreciation claimed on assets
used in the farming business. In her petition filed June 16, 1978,
petitioner sought to elect under section 754 to adjust the bases of
partnership assets pursuant to section 743(b).

?The accounts receivable were “income in respect of a decedent” under
sec. 691, and under secs. 741 and 1014(c) did not receive a step-up in basis.
Quick’s Trust v. Commissioner, 444 F 2d 90, 92 (8th Cir. 1971), affg. per curiam
54 T.C. 1336 (1970). Accord, Woodhall v. Commissioner, 454 F 2d 226, 228-229
(9th Cir. 1972), affg. a Memorandum Opinion of this Court. H. Rept. 1337, to
accompany H.R. 8300 (Pub. L. 591), 83d Cong., 2d Sess. 70-71 (1954).

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1. Section 1014 Basis Adjustment

The parties agree that under subsection (a) of section
1014,3 as in effect during the period in issue, the basis of property
which was acquired from or which passed from a decedent is
generally its fair market value at decedent’s death. In the case of
community property which was held by a decedent and by a
surviving spouse and at least one-half of which was includable in
the decedent’s gross estate, subsection (b)(6)* of that section
provides that the surviving spouse’s one-half share of the
community property shall be treated as property s~quired from
the decedent and its basis shall also be adjusted. See sec. 1.1014-
2(c)(2), Income Tax Regs. The parties differ, however, as to what
property of the decedent in the instant case qualifies for the basis

'SEC. 1014. BASIS OF PROPERTY ACQUIRED FROM A DECEDENT.

(a) IN GENERAL.-Except as otherwise provided in this section, the basis.
of property in the hands of a person acquiring the property from a decedent or
to whom the property passed from a decedent shall, if not solid, exchanged, or
otherwise disposed of before tne decedent’s death by such person, be the fair
market value of the property at the date of the decedent's death * * *

‘Sec. 1014(b) provides that-
the following property shall be considered to have been acquired from or to
have passed from the decedent:

* 7 - * . . * o o

(6) In the case of decedents dying after December 31, 1947, property which
represents the surviving spouse’s one-half share of community property held
by the decedent and the surviving spouse under the community property laws
of any State, Territory, or possession of the United States or any foreign
country, if at least one-half of the whole of the community interest in such
property was includible in determining the value of the decedent’s gross estate
under chapter 11 of subtitle B (section 2001 and following, relating to estate tax)
or section 811 of the Internal Revenue Code of 1939,

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adjustment.

According to respondent, the community property held by
petitioner and Ernest at his death was not the partnership assets
but rather the partnership interests. Citing section 708(a) and
(b)(1), he contends that the partnership continued after Ernest’s
death and that the assets therefore continued to be held in
tenancy in partnership. Although the partnership interests
qualified for the section 1014 basis adjustment, in respondent’s
view, a corresponding adjustment in the bases of the partnership
assets could be effected only by a partnership election under
section 754. Because that election was not timely made by the
partnership, respondent argues, the section 1014 basis
adjustment applies only to the partnership interests.

In petitioner’s view, the partnership terminated on Ernest’s
death under the terms of the partnership agreement as well as
under the principles of Federal tax and California law. Upon
termination, the community property subject to probate
administration in Ernest’s estate included, petitioner contends,
the partnership assets as well as the partnership interests.
Therefore, the argument goes, the bases of the partnership
assets are adjusted under section 1014.

We uphold respondent’s determination. While, at first
blusn, it may seem incongruous that this husband-wife
partnership continued after Ernest’s death until its affairs were
wound up, we thin! it quite clearly did.
owned their partnership interests as community property at
Ernest’s death. Those interests, as the parties agree, thus qualify
for basis adjustments under section 1014(a) and (b)(6).
Petitioner does not contend, and the record does not show, that
any of the partnership assets were distributed to Ernest before
his death, and the bases of those assets, not the partnership

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interests, are here at issue.

Under California law, Ernest’s death did not cause the
specific partnership assets, as distinguished from the
partnership interests, to pass from him or his estate to petitioner.
A partner’s interest in a partnership under California law is “his
share of the profits and surplus,” and he is “co-owner with his
partners of specific partnership property,” holding, however, as
a “tenant in the partnership.” Cal. Corp. Code secs. 15024,
15025(1), 15026(West 1977).5 Kenworthy v. Hadden, 87 Cal.
App. 3d 696, 151 Cal. Rptr. 169, 172(3d Dist. Ct. App. 1978).
Unless the partners have provided otherwise in a written
agreement which they have all signed, the death of a member
does not cause an immediate distribution of the partnership
assets but causes a firm dissolution, which is defined as “the
change in the relation of the partners caused by any partner
Ceasing to be associated in the carrying on as distinguished from
the winding up of the business.” Cal. Corp. Code secs. 15029,
15031(4) (West 1977).

Upon the dissolution of a partnership, a partner has the
right to an accounting of the value of his partnership interest, in

5Sec. 15024. Property rights

The property rights of a partner are (1) his rights in specific partnership
property, (2) his interest in the partnership, and (3) his right to participate in the
management.

Sec. 15025. Ownership of specific partnership property
(1) Co-owner; tenancy in partnership. A partner is co-owner with his
partners of specific partnership property holding as a tenant in partnership.

Sec. 15026. Interest in partnership
A partner’s interest in the partnership is his share of the profits and
surplus, and the same is personal property.

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other words, the value of his ratable share of firm profits and
surplus remaining after both satisfaction of creditors’ claims
against the partnership and an accounting between the partners.
Cal. Corp. Code secs. 15038, 15040, 15042, 15043 (West 1977).
Dissolution does not, however, vest the partners with ownership
in specific partnership assets. Comstock v. Fiorella, 67 Cal.
Rptr. 104, 105-106 (4th Dist. Ct. App. 1968). Indeed, even when a
husband-wife partnership is dissolved by the death of the
husband, partnership “assets, debts, and credits remain distinct
from those of its late members.” Electric Equipment Co. v.
Heineman, 7 Cal. App. 2d 792, 45 P.2d 830,831 (2d Dist. Ct. App.
1935).¢

The record contains no written agreement providing that
dissolution would not occur at the death of either petitioner or
Ernest. Therefore, it is clear that, under California law, Ernest's
death caused a dissolution. The dissolution did not, however,
transform the interests of Ernest and petitioner in the firm assets
into direct ownership of those assets. The liquidation of the
partnership or the winding up of its affairs remained to be

“in Electric Equipment Co. v. Heineman, 7 Cal. App. 2d. 792, 45 P.2d 830,
831 (2d Dist. Ct. App. 1935), involving a husband-wife partnership, the court
explained:

“When a partnership is dissolved by the death of one of the partners, its
assets, debts, and credits remain distinct from those of its late members. The
surviving partners should proceed to wind up the affairs of the partnership, pay
its debts out of the assets, and divide the residue, if any, among those who are
entitled thereto.”

This case arose under the State law as it stood prior to the adoption of the
California version of the uniform partnership law, but its holding is consistent
with *he law as it stood at Ernest's death.

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accomplished. Hence, it cannot be said that, by operation of
California law, the partnership assets became property acquired
from or passing from decedent, within the meaning of section
1014.

Significantly, moreover, the Inter=al Revenue Code, not
State law, determines who is a partners and what is a partnership
for Federal tax purposes. Secs. 761(a) and (b), 7701 (a2). Evans
vu. Commissioner, 447 F.2d 547, 550, 552(7th Cir. 1971), affg. 54
T.C. 40 (1970); Baker Commodities, Inc. v. Commissioner, 415
F.2d 519, 525 (9th Cir. 1969), affg. 48 T.C. 374 (1967), cert.
denied 397 U.S. 988 (1970). And it is clear that on December
31,1973, the partnership did not terminate, within the meaning of
section 708’ (the Code provision which determines whether a
partnership is considered as terminated). A partnership is
“considered” as terminated “only if,” in pertinent part, no part of
its business “continues to be carried on by any of its partners ina
partnership.” Sec. 708(b)(1)(A); sec. 1.708-1(b)(1){i), Income
Tax Regs. With respect to a two-member partnership, the
regulations expressly provide that the firm shall not be
considered as terminated upon the death of one partner if the
estate or other successor in interest of the deceased partner

"SEC. 708. CONTINUATION OF PARTNERSHIP.
(a) GENERAL RULE.-For purposes of this subchapter, an existing
partnership shail be considered as continuing if it is not terminated.
(b) TERMINATION..
(1) GENERAL RULE.-For purposes of subsection (a), a partnership
shall be considered as terminated only if-
(A) no part of any business, financial operation, or venture of the
partnership continues to be carried on by any of its partners in a partnership, or
(B) within a 12-month period there is a sale or exchange of 50 percent
or more of the total interest in partnership capital and profits.

A-18

“continues to share in the profits or losses of the partnership
business.” Sec. 1.708-1(b)(1)(iMa), Income Tax Reys.* Haines v.
United States, an unreported opinion (D. N.J. 1976,37 AFTR 2d
76-768, 76-1 USTC par. 9222.)

When Ernest died, as stated above, the partnership owed
debts in excess of $200,000. Unless otherwise discharged after
his death, those partnership debts were paid in 1974 from crop
income and collections of accounts receivable of the farming
business. '° Payment of the partnership debts relieved the estate

*Sec. 1.708-1(b)1)(iMa), Income Tax Regs., provides as follows:

“Upon the death of one partner in a 2-member partnership, the
partnership shall not be considered as terminated if the estate or other
successor in interest of the deceased partner continues to share in the profits
or losses of the partnership business.”

%m Glassell v. Prentiss, 175 Cal. App. 2d 599, 346 P.2d 895, 901 (4th Dist.
Ct. App. 1959), the court explained:

“In settling accounts between partners after dissolution, the liabilities of

the partnership to creditors first must be paid; secondly, the liabilities owing to
partners other than for capital and profits, and thereafter the liabilities owing to
partners in respect to capital and profits. * * *
If there is not sufficient partnership property to satisfy the liabilities, each
partner must contribute his share towards such satisfaction, and any partner
who contributes more than his share may recover from a defaulting partner the
amount which was pe? in eavess «f b's liability. * * *”

See also Cal. Corp. Code sec. 15036(4) (West 1977}.

The second report of petitioner, as executrix, filed in the Superior Court,
as well as the Court's order approving her report, shows that only one
creditor's claim was filed against the estate as such-a claim by petitioner herself
in the amount of $4,182.45. The partnership’s debts thus were not treated as
debts of the estate. Nor is there any evidence in that report or any of the other
Superior Court documents in evidence indicating that the proceeds of the
partnership crops were controlled by, or even reported to, the court.

A-19

of liability for them. Ernest’s and petitioner’s one-half shares of
the partnership interests remained in the partnership subject to
creditors’ claims after December 31, 1973."' Indeed, the 1974
return filed by the estate shows that the estate treated as its own
one-half of the collections and the crop income. Accordingly, it is
clear that Ernest’s estate continued to share in the profits of the
meaning of section 708(a) and (b)(1), did not terminate until after
Ernest’s death. Sec. 1.708-1(b)(1)(i(a), Income Tax Regs.
Ernest’s death, petitioner would distinguish cases addressing the
issue whether post-dissolution activities were sufficient to
constitute continuation of a parinership under section 708.
Baker Commodities, Inc. v. Commissioner, 415 F.2d 5:9 (9th
Cir. 1969), affg. 48 T.C. 374 (1967), cert. denied 397 U.S. 988
(1970); Foxman v. Commissioner, 41 T.C. 535 (1964), affd. 352
F.2d 466 (3d Cir. 1965); Ginsberg v. United States, 184 Ct. Cl.
444, 396 F.2d 983 (1968). While the post-December 31, 1973,
business activities in the instant case were extensive, our
for Federal tax purposes is based not on the extent of activity
conducted, but on the facts that the partnership was not wound
up at Ernest’s death and the estate continued to share in the
partnership profits or losses. Therefore, we do not discuss
petitioner

"One commentator has opined that the estate shares in partnership
profits or losses if the decedent's capital interest remains in the partnership
subject to claims of partnership creditors. W. McKee, W. Nelson & R.
Whitmire, Federal Taxation of Partnerships and Partners, par. 12.04{2], n. 34
(1977).

A-20

petitioner's attempts to distinguish other cases to which section
1.708-1(b)(1)(iMa), Income Tax Regs., does not apply. Evans v.
Commissioner, supra; Maxcy v. Commissioner, 59 T.C. 716
(1973); Estate of Panero v. Commissioner, 48 T.C. 147 (1967).'?

Petitioner has cited no provision of the Internal Revenue
Code, and we know of none, which would characterize the
partnership assets as property qualifying for the section 1014(a)
and (b)(6) basis adjustment, i.e, property acquired from a
decedent or property in the hands of a person to whom it passed
from a decedent. To the contrary, subchapter K of chapter 1 of
the Code expressly contemplates a situation in which the basis
of a partnership interest is adjusted under section 1014 while the
bases of firm assets are unchanged. Section 743(a) provides
that:

The basis of partnership property shall not be adjusted as the
result of a transfer of an interest in a partnership * * * on the death
of a partner unless the election provided by section 754 (relating to
optional adjustment to basis of partnership property) is in effect
with respect to such partnership.

Estate of Dupree v. United States, 391 F.2d 753, 758 (5th Cir.
1968). Thus, only after filing a timely section 754 election may the

%The deemed distribution of partnership property, described in sec.
1.708- 1(b)( 1)iv), Income Tax Regs., does not apply in the instant case. Such a
deemed distribution applies “if a partnership is terminated by a sale or
exchange of an interest.” A disposition of a partnership interest by bequest or
inheritance is not a sale or exchange of an interest, within the meaning of the
regulation. Sec. 1.708-1(b)(1)(ii), Income Tax Regs.

firm adjust the bases of partnership assets under section 743(b)%
with respect to the transferee partner. Courts have recongnized
that under these Code sections, in the absence of a valid
election, the transferee of a partnership interest may have a basis
for that interest far larger than his ratable share of the adjusted
basis of partnership property. Estate of Dupree v. United States,
391 F.2d at 758; Jones v. United States, 213 Ct. Cl. 529, 532 and
n. 3,553 F.2d 667, 668 (1977).

As we understand her argument, petitioner links together
several Federal income tax and State law provisions to support
her theory that the bases of partnership assets were adjusted at
Ernest’s death. She first argues that the partnership was
terminated on December 31, 1973. We have pointed out that
Ernest’s estate continued to share in the profits of the
partnership and that it did not, therefore, terminate for Federal

"SEC. 743. OPTIONAL ADJUSTMENT TO BASIS OF PARTNERSHIP
PROPERTY.

(b) ADJUSTMENT TO BASIS OF PARTNERSHIP PROPERTY .- In the
case of a transfer of an interest in a partnership by sale or exchange or upon the
death of a partner, a partnership with respect to which the election provided in
section 754 is in effect shall-

(1) increase the adjusted basis of the partnership property by the excess
of the basis to the transferee partner of his interest in the partnership over his
proportionate share of the adjusted basis of the partnership property, or

(2) Decrease the adjusted basis of the partnership property by the
excess of the transferee partner's proportionate st.are of the adjusted basis
of the partnership property over the basis of his interest in the partnership.

Under regulations prescribed by the Secretary or his delegate, such increase or
decrease shall constitute an adjustment to the basis of partnership property
with respect to the transferee partner only. * * *

A-22

tax purposes. Citing article 8 of the partnership agreement,
which provided that “the partnership shall terminate upon the
death of either partner,” however, petitioner argues that the
partnership terminated at Ernest’s death. Yet article 10 of the
agreernent, set out above, provides that the estate of a deceased
partner is entitled to determine whether the partnership will, if it
has not already done so, elect under section 754 to adjust the
bases of partnership property. Implicit in this provision is an
assumption that the partnership would continue for some period
of time after the death of one of the two partners.

As we.construe the agreement as a whole, the word
“terminate” as used in article 8 denotes not an immediate
termination within the meaning of either California partnership
law or subchapter K but rather a dissolution to be followed in due
course by a winding up of partnership affairs. A dissolution is not
synonymous with a termination. Rather a dissolved partnership
“continues until the winding up of partnership affairs is
completed.” Cal. Corp. Code secs. 15030, 15031(4) (West
1977)."* Yahr-Donen Corp. v. Crocker, 80C2a' Aop. 2d 788, 182
P.2d 209, 211 (2d Dist. Ct. App. 1947). Winding up involves
payment of partnership liabilities and settling of accounts
15041 (West 1977); Comstock v. Fiorello, 260 Cal. App. 2d 262,

“Sec. 15030. Effect of dissolution
On dissolution the partnership is not terminated, but continues until the
winding up of partnership affairs is completed.

Sec. 15031. Causes of dissolution

Dissolution is caused:

(4) By the death of any partner unless otherwise provided in * agreement
in writing signed by all the partners before such death;

A-23

67 Cal. Rptr. 104, 106 (4th Dist. Ct. App. 1968); Glassell v.
Prentiss, 175 Cal. App. 2d 599, 346 P.2d 895, geo Ct.
App. 1959). ‘

As stated above. thc partnership had on hand accounts
receivabie, harvested crops, and growing crops as well as other
assets and had large amounts of indebtness outstanding on
December 31, 1973, when Ernest died. The crops were not all
sold for several months, and the liabilities were not fully
discharged until September 1974. Hence, the partnership was
dissolved but was not terminated at Ernest’s death.

Since the winding up of the partnership was not completed
at Ernest’s death, the partnership did not then terminate even if,
as petitioner contends, her conduct of the farming business after
December 31, 1973, exceeded the authority of a surviving
partner to wind up partnership affairs. As petitioner
acknowledges, the partnership is bound even on transactions
undertaken by a surviving partner in excess of the authority
conferred by Cal. Corp. Code secs. 15033 and 15035(1) (West
1977) if the other party to the tansaction knew of the partnership
prior to dissolution, had no knowledge or notice of the
dissolution, and, in the case of one who was not prior partnership
creditor, the fact of dissolution had not been advertised in a
newspaper in accordance with Cal. Corp. Code secs.
15035(1)(b)(I]) and 15035.5 (West 1977).

The record does not reveal (i.e., petitioner has not carried
the burden of proving) who are the other parties to those
transactions which petitioner describes as outside the scope of
winding up the partnership, whether those parties knew of the
partnership prior to dissolution, or whether they had notice or
knowledge of dissolution. However, the parties have stipulated

A-24

that no notice of dissolution was published. In fact, as the parties
have stipulated, the name “Santa Rita Ranch Co.” was used in
continuing the business “in a conscious effort to create an
impression of continuity with third parties.” All bank accounts
maintained by the partnership before December 31, 1973, were
kept in the name of Santa Rita Ranch Co. Checks on those
accounts bore no notation that the accounts had become those
of Ernest’s estate. We cannot, therefore, conclude that the
partnership was not bound by these transactions under
California law.

Petitioner further cites Cal. Prob. Code sec. 202 (West
1956),'5 and Cal. Civ. Code sec. 5125 (West 1970),'* which, as in
effect in 1973, subjected both the husband's and the wife’s shares
of community personal property, including partnership
interests, to probate administration upon the husband’s death.
Petitioner states that she applied fur and was granted permission
by the Superior Court to continue the farming business in her
capacity as executrix of the estate. The Superior Court, she
argues, treated the partnership as terminated and its assets as
community property administered in the estate. On this theory,
petitioner concludes that the farming business became part of

Cal. Prob. Code sec. 202(West 1956) provided in part that:

“Community property passing from the control of the husband * * * by
reason of his death * * * is subject * * * to administration and disposal under the
provisions of Division 3 [Administration of Estates of Decedents] of this code *

se

Cal. Civ. Code sec. 5125 (West 1970) provided in part that:

“the husband has the management and control of the community personal
property ** * *

A-25

the estate and was carried on in Ernest’s estate and by his
executrix rather than in the partnership and by a partner for
State law purposes. Noting that Federal income tax law
determines the existence and termination of a partnership but
that local law governs in determining the legal relationships of
partners and their interests in partnership assets (sec. 301.7701-
l(c), Proced. & Admin. Regs.), she maintains that the
partnership is, therefore, considered as terminated under
section 708(b)(1)(A), quoted in note 7 supra, for Federal tax
purposes as well.

We agree with petitioner that both her and Emest’s
partnership interests were subject to probate administration in
Ernest’s estate. By stating that the executrix controls the assets
in the estate subject to court jurisdiction, however, she
misconstrues both Cal. Prob. Code sec. 300 (West 1956), and
the cases on which she relies. Under these authorities, the
executrix, as an officer of the court, merely has possession; the
Superior Court controls the assets. In re Estate of Cole, 240 Cal.
App. 2d 324, 49 Cal. Rptr. 419, 423 (1st Dist. Ct. App. 1966); In re
Algee’s Estate, 158 Cal. App. 2d 691, 323 P.2d 221, 226 (2d Dist.
Ct. App. 1958). Though administered in the probate court,
petitioner’s half interest in the partnership never became a part
cf Ernest’s estate.'? Subjecting the partnership interests to

"In Bishop v. Commissioner, 152 F.2d 389, 391 (9th Cir. 1945), revg. and
remanding 4 T.C. 588 (1945), the court explained:

“Tle Tax Court appears to have assumed that, upon decedent’s death,
petitioner’s half of the community property ceased to he hers and became a
part of decedent's estate. The assumption is incorrect. Petitioner’s half, like
decedent's half, was subject to adminis*zation, but, unlike his half, her half
never became a part of his estate. [Fn. refs. omitted. |

A-26

probate administration, moreover, did not effectuate a
liqvidation of the partnership and the winding up of its affairs.
That remained to be done.

We do not agree with petitioner’s further argument that she
is taxable on one-half the income from the farming business not
“aS a partner in a continuing partnership” but as the surviving
spouse whose one-half the interest in the community property
was subject to probate administration in Ernest’s estate. Bishop
v. Commissioner, 152 F.2d 389, 390 (9th Cir. 1945), revg. and
remanding 4 T.C. 588 (1945), cited by petitioner, does not
support that position. Construing California law, the Bishop
court held that the taxpayer’s one-half share of community
property, although subject to probate administration in her
husband’s estate, belonged to her after, as well as before, her
husband’s death. Therefore, income attributable to that share
was taxable to her. Bishop v. Commissioner, supra at 390-391.
Our conclusions that petitioner remained the owner of her
partnership interest until the affairs of the partnership were
wound up and that the partnership continued after December
31, 1973, for State law as well as Federal tax purposes are

Moreover, the fact that petitioner applied for and was
granted authority from the Superior Court to operate the
farming business does not, as she maintains, mean that she had
no authority under California law to operate the partnership as
surviving partner. As our discussion above indicates, she was
able to bind the partnership on the transactions she undertook
after December 31, 1973. California partnership law expressly
provides (Cal. Corp. Code sec. 15045 (West 1977):

A-27

The rights and duties of surviving partners, the leg:l
representatives of deceased partners, the creditors of such partners,
and the creditors of the partnership * * * shall be given full force and
effect notwithstanding any provision inconsistent therewith in the
Probate Code * * *

Therefore, we cannot, as petitioner would have us, conclude
that, under State law, the farming business was operated in the
estate by the executrix rather than in a partnership by a partner.

It is true, as petitioner observes, that the Superior Court
stated in its order dated March 15, 1974, that the partnership
terminated upon Ernest’s death, and that the partnership assets,
as community property of decedent and petitioner, became
subject to the jurisdiction of that court as a part of the
community property estate. However, the Superior Court made
that statement not in adjudicating whether the partnership
terminated under State ‘sw or whether the bases of its assets
were adjusted for Federal tax purposes but rather in the course
of administering Ernest’s estate. There is nothing in the record to
Superior Court’s statement is to be weighed in the light of the
facts that, as of December 31, 1973, the affairs of the partnership
had not been wound up, that its debts were paid during 1974
from its farm crop proceeds, and that the estate and petitioner
individually were thereby relieved of debts which would
otherwise have fallen on the estate and petitioner. Sec. 1.708-
1(b)(1)(i(a), Income Tax Regs. And, indeed, the partnership
debts were not treated by that court as debts of the estate but
rather were handled apart from the estate. The Superior Court’s
statement thus is not dispositive of the issue before us.

A-28

2. Section 754 Election

If the bases of the partnership assets were not adjusted at
Ernest’s death under section 1014, petitioner acknowledges that
the bases reported in the 1974 returns filed by her and by the
estate were correct only if an election under section 754 was
made. Although filed in neither the time period nor the manner
prescribed by section 1.754-1, Income Tax Regs., a valid election
was, in her view, filed in the petition in this case. Respondent, on
the other hand, maintains that the purported election, which was
neither timely nor made by the partnership, fails two
requirements of the regulation. We hold that the purported
election was not valid because it was not filed by the partnership
in a timely partnership return as required by section 1.754-
1(b)(1), Income Tax Regs.

In the case of a transfer of a partnership interest, the basis of
partnership property is adjusted with respect to the transferee if
the partnership files an election “in accordance with regulations
prescribed by the Secretary.” Sec. 754.'* In the instant case, the

"SEC. 754. MANNER OF ELECTING OPTIONAL ADJUSTMENT TO
BASIS OF PARTNERSHIP PROPERTY.

If a partnership files an election, in accordance with regulations prescribed
by the Secretary or his delegate, the basis of partnership property shall be
adjusted, in the case of a distribution of property, in the manner provided in
section 734 and, in the case of a transfer of a partnership interest, in the manner
provided in section 743. Such an election shall apply with respect to all
distributions of property by the partnership and to all transfers of interests in
the partnership during the taxable year with respect to which such election was
filed and all subsequent taxable years. Such election may be revoked by the
partnership, subject to such limitations as may be provided by regulation
prescribed by the Secretary or his delegate.

A-29

partnership did not file an election. Moreover, under the
regulations, such an election “shall be made in a written
statement filed with the partnership return for tive taxable year
during which the * * * transfer occurs.” Sec. 1.754-1(b)(1),
Income Tax Regs.'?

This regulation has been upheld as not unreasonable or
plainly inconistent with the revenue statutes. Jones uv. United
States, 213 Ct. Cl. 529, 537, 553 F.2d 667, 671, (1977). In that
opinion, the Court of Claims noted that a proposed version of
section 743 contained the requirement that the election be filed
with the partnership return for the year of the transfer, the same
requirement embodied in the regulation under section 754 (213
Ct. Cl. at 536, 553 F.2d at 671). Construing the regulation, the
court held that the election must be timely made with the original
return for the year of the transfer or in an amended return filed
within the statutory period for filing the original return. Jones v.
United States, 213 Ct. Cl. at 539, 553 F.2d at 672. Accord, Estate
of Dupree v. United States, 391 F.2d 753, 759 (Sth Cir. 1968)
(without reaching issue whether election must be filed only with
return for the year of the transfer, the court cited same time

Sec. 1.754-1 Time and manner of making election to adjust basis of

{(b) Time and method of making election. (1) An election under section 754
and this section to adjusi the basis of partnership property under section 734(b)
and 743(b), with respect to a distribution of property to a partner or a transfer of
an interest in a partnership, shall be made in a written statement filed with the
partnership return for the taxable year during which the distribution or transfer
occurs. For the election to be valid, the return must be filed not later than the
time prescribed by paragraph (e) of sec. 1.6031-1 (including extensions thereof)
for filing the return for such taxable year (or before August 23, 1956, whichever
is later). eee

c

A-30

period with respect to return with which purported election was
filed). A similar regulation has been upheld under another Code
Section. National Western Life Insurance Co. v. Commissioner,
54 T.C. 33, 40 (1970) (sec. 1.818-4(e), Income Tax Regs.).

Here, the tansfer occurred at Ernest’s death. No election
was filed with the partnership return for 1973. The purported
election was filed as part of the petition in this proceeding on
June 16, 1978, more than 4 years after the period for filing the
1973 partnership return and thus even later than the purported
election in Jones.

Petitioner does not, as did the taxpayer in the Jones case,
contend that the time period prescribed by the regulation
allowed insufficient time to decide whether to elect under section
754. The Court of Claims rebutted the argument in that case, in
part, by noting that no extension of time to file the partnership
return or the election was ever requested. Similarly, neither the
partnership nor petitioner in the instant case ever requested an
extension of time to file the return or the election.

According to petitioner, a line of installment method
election cases (Mamula v. Commissioner, 346 F.2d 1016 (9th
Cir. 1965), revg. and remanding 41 T.C. 572 (1964); Scales v.
Commissioner, 211, F.2d 133 (6th Cir. 1954), revg. and
remanding 18 T.C. 1263 (1952); Bayley v. Commissioner,
35,T.C. 288 (1960); Estate of Broadhead v. Commissioner, T.C.
Memo. 1972-195), holds that a late election is valid if the taxpayer
reasonably relied on a characterization of the transaction which
would not entail an election and if the election later became
necessary for the first time after determination of deficiencies.
Returning to her arguments with respect to the first issue in this
case, petitioner characterizes the failure to elect as reasonable

A-31

and maintains that the election became necessary only when
respondent determined that the bases of partnership assets
were not adjusted at Ernest’s death.

We do not agree that these case~ stand for the foregoing
broad proposition. They are all distinguishable from the case
before us. The taxpayer in Mamula originally reported gain on
the sale of real estate on the basis of an accounting method not
allowed by the regulations under section 453(b). Permitting the
taxpayer to belatedly elect the installment method, the Ninth
Circuit stated that a late election could be made if the original
election was invalid. Furthermore, it deemed the regulation
under section 453 inapplicable to the case before it. Here the
initial failure to elect under section 754 was not invalid as the
basis adjustment is optional.

In Bayley and Estate of Broadhead, this Court relied in part
on the Commissioner’s published position in Rev. Rul. 56-396,
1956-2 C.B. 298, and Rev. Rul. 65-297, 1965-2 C.B. 152,
respectively, that a taxpayer could elect installment method
treatment even if he failed to comply with section 1.453-8(b)(1),
Income Tax Regs. No such concession applies to the instant
case. In Scales, the Sixth Circuit cited its opinion in United
States v. Eversman, 133 F .2d 261, 266 (6th Cir. 1943), which held
that section 44(b) and (d), the relevant Code provision,
contained no requirement that an express election be made in
the tax return. As this Court has observed, neither did the
regulations applicable in Scales and Eversman require an

election in the income tax return. Reaver v. Commissioner, 42
T.C. 72, 78-80 (1964). In contrast, the regulations under section
754 contain such a requirement.

adjustment only if the “partnership files an election” and only if
the election is filed “in accordance with regulations prescribed
by the Secretary or his delegate.” The partnership did not file an
election in this case. The only purported election was that filed
by petitioner on June 16, 1978, in the petition herein. By that
time, indeed by not later than February 26, 1975, the partnership
partnership had ceased to exist: its assets had been sold or
transferred to Santa Rita Farms, Inc.; its debts had been paid;
and the assets of Ernest’s estate had been distributed.
Moreover, the election was not made in a written statement filed
with a timely return for the partnership for the taxable year
during which the distribution or transfer occurred as required by
the regulation. We are compelled, therefore, to hold that a valid
basis adjustment election was not made pursuant to section
754.
To reflect the foregoing,

Decision will be entered for the respondent.

My ABA

Internal Revenue Code Sections:
Sec. 708. Continuation of Partnership

(a) GENERAL RULE. For purposes of this subchapter, an
existing partnership shall be considered as continuing if it is not
terminated.

(b) TERMINATION.

(1)GENERAL RULE. For purposes of subsection (a),
a partnership shall be considered as terminated only if--

(A) no part of any business, financial
operation, or venture of the partnership continues to be
carried on by any of its partners in a partnership, or

(B) within a 12-month period there is a sale or
exchange of 50 percent or more of the total interest in
partnership capital and profits.

(2) SPECIAL RULES.

(A) MERGER OR CONSOLIDATION. In the
case of the merger or consolidation of two or more
partnerships, the resulting partnership shall, for purposes of
this section, be considered the continuation of any merging
or consolidating partnership whose members own an
interest of more than 50 percent in the capital and profits of
the resulting partnership.

(B) — DIVISION OF A PARTNERSHIP. In the
case of a division of a partnership into two or more
partnerships, the resulting partnerships (other than any
resulting partnership the members of which had an interest
of 50 percent or less in capital and profits of the prior
partnership) shall, for the purposes of this section, be
considered a continuation of the prior partnership.

Sec. 743. Optional Adjustment to Basis of Partnership
Property.

(a) GENERAL RULE. The basis of partnership property
shall not be adjustd as the result of a transfer of an interest in a
partnership by sale or exchange or on the death of a partner
unless the election provided by section 754 (relating to optional
adjustment to basis of partnership property) is in effect with
respect to such partnership.

(b) ADJUSTMENT TO BASIS OF PARTNERSHIP
PROPERTY. In the case of a transfer of an interest in a
partnership by sale or exchange or upon the death of a partner, a
partnership with respect to which the election provided in
section 754 is in effect shall--

(1) increase the adjusted basis of the partnership
property by the excess of the basis to the transferee partner
of his interest in the partnership over his proportionate
share of the adjusted basis of the partnership property, or

(2) decrease the adjusted basis of the partnership
property by the excess of the transferee partner's
proportionate share of the adjusted basis of the partnership
property over the basis of his interest in the partnership.

Under regulations prescribed by the Secretary, such increase or
decrease shall constitute an adjustment to the basis of
partnership property with respect to the transferee partner only.
A partner’s proportionate share of the adjusted basis of
partnership property shall be determined in accordance with his
interest in partnership capital and, in the case of an agreement
described in section 704 (c) (2) (relating to effect of partnership
agreement on contributed property), such share shall be

determined by taking such agreement into account. In the case
of an adjustment under this subsection to the basis of
partnership property subject to depletion, any depletion
allowable shall be determined separately for the transferee
partner with respect to his interest in such property.

Sec. 754. Manner of Electing Optional Adjustment to Basis
of Partnership Property.

If a partnership files an election, in accordance with
regulations prescribed by the Secretary, the basis of
partnership property shall be adjusted, in the case of a
distribution of property, in the manner provided in section 734.
and, in the case of a transfer of a partnership interest, in the
manner provided in section 743. Such an election shall apply with
respect to all distributions of property by the partnership and to
all transfers of interest in the partnership during the taxable year
with respect to which such election was filed and all subsequent
taxable years. Such election may be revoked by the partnership,
subject to such limitations as may be provided by regulations
prescribed by the Secretary.

Treasury Regulations on Income Taxes:

§1.708-1(a) to 1.708-1(b) (I) (i) (a) CONTINUATION OF
PARTNERSHIP.

(a) GENERAL RULE. For the purposes of subchapter K,
chapter 1 of the Code, an existing partnership shall be
considered as continuing if it is not terminated.

(b) TERMINATION (1) GENERAL RULE. (i) A partnership
shall terminate when the operations of the partnership are
discontinued and no part of any business, financial operation, or
venture of the partnership continues to be carried on by any of
its partners in a partnership. For example, on November 20,
1956, A and B, each of whom is a 20-percent partner in
partnership ABC, sell their interests to C, who is a 60-percent
partner. Since the business is no longer carried on by any of its
partners in a partnership, the ABC partnership is terminated as
of November 20, 1956. However, where partners DEF agree on
April 30, 1957, to dissolve their partnership, but carry on the
business through a winding up period ending September 30,
1957, when all remaining assets, consisting only of cash, are
distributed to the partners, the partnership does not terminate
because of ceasing of business until September 30, 1957.

(a) | Upon the death of one partner in a 2-member
partnership, the partnership shall not be considered as
terminated if the estate or other successor in interest of the
deceased partner continues to share in the profits or losses
of the partnership business.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_0812%3A2. Public record. Not legal advice.