B-209032, MAY 24, 1983

B-209032, MAY 24, 1983

PRECIS-UNAVAILABLE

THE COMPTROLLER GENERAL:

WE ARE FORWARDING THE FILE RELATIVE TO THE CLAIM OF MR. GREGORY B. RICE. MR. RICE REQUESTS REIMBURSEMENT OF REAL ESTATE EXPENSES INCURRED INCIDENT TO THE SALE OF HIS HOUSE IN CONNECTION WITH HIS PERMANENT CHANGE OF STATION AS AN EMPLOYEE OF THE INTERNAL REVENUE SERVICE.

HE CLAIMS A REAL ESTATE COMMISSION OF $4,950.00, LEGAL COSTS INCURRED IN PREPARING A LIMITED PARTNERSHIP AGREEMENT OF $498.00, AN APPLICATION FEE FOR FICTITIOUS NAME FOR PARTNERSHIP OF $10.00, COPYING COSTS OF $22.89, PUBLICATION COSTS (PARTNERSHIP'S NAME) OF $18.00, AND RECORDING FEES (AGREEMENT) OF $29.00, FOR A SUM OF $5,527.89.

MR. RICE FORMED A LIMITED PARTNERSHIP TO WHICH HE SOLD HIS RESIDENCE. RETAINS A 1/6 INTEREST OR SHARE IN THE LIMITED PARTNERSHIP WHICH CAUSED HIS AGENCY TO DISALLOW THE CLAIM.

MR. RICE'S ATTORNEY, IN A LETTER DATED FEBRUARY 5, 1982, STATES THAT UNDER THE LAWS OF CALIFORNIA, A LIMITED PARTNERSHIP IS A DISTINCT LEGAL ENTITY AND CAN ACQUIRE AND SELL PROPERTY IN ITS OWN NAME. HE ASSERTS THAT THE VARIOUS PARTNERS, WHILE HAVING AN OWNERSHIP INTEREST IN THE PARTNERSHIP ITSELF, ARE NOT, AS INDIVIDUALS, OWNERS OF THE RESIDENCE MR. RICE SOLD TO THEM.

OUR RESEARCH REVEALS LITTLE OR NO INFORMATION ON LIMITED PARTNERSHIPS AND HOW THEY RELATE TO THIS TYPE OF CLAIM. IN VIEW OF THE LACK OF REASONABLE GUIDELINES BY WHICH TO ADJUDICATE THE MATTER, WE ARE SUBMITTING THE CLAIM FOR YOUR CONSIDERATION AND INSTRUCTIONS. THE ADJUDICATOR HANDLING THIS CASE IS GEORGE TANSEY WHO CAN BE REACHED AT 275-3218.

RETURNED.THE CLAIM SUBMITTED BY MR. GREGORY B. RICE, AN EMPLOYEE OF THE INTERNAL REVENUE SERVICE, SEEKS REIMBURSEMENT OF REAL ESTATE EXPENSES INCURRED IN THE SALE OF HIS RESIDENCE AT HIS OLD DUTY STATION. THE RESIDENCE WAS SOLD TO A LIMITED PARTNERSHIP IN WHICH MR. RICE, AS A GENERAL PARTNER, HELD A ONE-SIXTH INTEREST. FOR THE REASONS SET FORTH BELOW, THE CLAIM MAY NOT BE PAID.

IN THE STATE OF CALIFORNIA WHERE THE PARTNERSHIP WAS CREATED, A PARTNERSHIP, INCLUDING A LIMITED ONE, UNLIKE A CORPORATION, IS GENERALLY CONSIDERED TO BE AN ASSOCIATION OF INDIVIDUALS, NOT A LEGAL ENTITY. BEDOLLA V. LOGAN & FRAZER, 125 CAL. RPTR. 59 (CT. APP. 1975); DONROY, LTD., V. UNITED STATES, 196 F. SUPP. 54, (N.D. CAL. 1961), AFF'D, 301 F. 2D 200 (9TH CIR. 1961). UNDER THIS VIEW, EACH PARTNER, WHETHER GENERAL OR LIMITED, HAS AN INTEREST AS SUCH IN THE ASSETS AND THE PROFITS OF THE PARTNERSHIP. DONROY. WHILE OWNERSHIP AND POSSESSION OF PARTNERSHIP PROPERTY ARE SHARED, THEY ARE NONETHELESS PERSONAL. IN RE SUBPOENA DUCES TECUM, 81 F. SUPP. 418 (N.D. CAL. 1948).

THE RECORD DISCLOSES THAT MR. RICE IS A GENERAL PARTNER IN THE LIMITED PARTNERSHIP, "2120 RIDGEWOOD." (SEE PROMISSORY NOTE DATED SEPTEMBER 11, 1981). AS A GENERAL PARTNER, AND WITH CERTAIN SPECIFIED LIMITATIONS, HE HAS ALL OF THE RIGHTS, POWERS, RESTRICTIONS, AND LIABILITIES POSSESSED BY PARTNERS IN "NON-LIMITED" PARTNERSHIPS. CAL. CORP. C.A., SEC. 15543. GENERAL PARTNER'S PROPERTY RIGHTS INCLUDE: (1) HIS RIGHTS IN SPECIFIC PARTNERSHIP PROPERTY, (2) HIS INTEREST IN THE PARTNERSHIP, AND (3) HIS RIGHT TO PARTICIPATE IN THE MANAGEMENT OF THE PARTNERSHIP. CAL. CORP. C.A., SEC. 15024. THE SUPREME COURT OF CALIFORNIA HAS HELD THAT A GENERAL PARTNER POSSESSES A PROPERTY INTEREST IN THE SPECIFIC ASSETS OWNED BY THE PARTNERSHIP. HIS PROPERTY INTEREST IN THE PARTNERSHIP IS THEREFORE AVAILABLE TO SATISFY A JUDGMENT AGAINST THE GENERAL PARTNER IN HIS INDIVIDUAL CAPACITY. THE RELATIONSHIP OF A GENERAL PARTNER TO THE PARTNERSHIP IS OF A CLOSE AND PERSONAL CHARACTER, AS DISTINGUISHED FROM THE DETACHED AND IMPERSONAL CHARACTER OF THE RELATIONSHIP OF A LIMITED PARTNER TO THE PARTNERSHIP. EVANS V. GALARDI, 546 P. 2D 313 (SUP. CT. CAL. 1976). SPECIFICALLY, THE PROPERTY INTEREST HELD BY MR. RICE IN THE UTAH RESIDENCE, AS A GENERAL PARTNER IN THE LIMITED PARTNERSHIP, IS THAT OF A CO-OWNER WITH HIS PARTNERS. HE HOLDS SUCH INTEREST AS A TENANT IN PARTNERSHIP WITH AN UNDIVIDED OWNERSHIP OF THE WHOLE. SEE CAL. CORP. C.A., SEC. 15025; ZEMELMAN V. BOSTON INS. CO., 84 CAL. RPTR. 206 (CT. APP. 1970).

UNDER 5 U.S.C. SEC. 5724AA)(4) (1976) AND PARAGRAPH 2-6.1, FEDERAL TRAVEL REGULATIONS, FPMR 101-7 (SEPTEMBER 1981) (FTR), A FEDERAL EMPLOYEE MAY BE REIMBURSED FOR EXPENSES REQUIRED TO BE PAID BY HIM WHEN HE SELLS HIS RESIDENCE AT HIS OLD OFFICIAL STATION. A SALE OF LAND IS THE ACTUAL TRANSFER OF TITLE TO THE LAND FROM GRANTOR TO GRANTEE BY AN APPROPRIATE INSTRUMENT OF CONVEYANCE. KEOGH V. PECK, 147 N.E. 266 (SUP. CT. ILL. 1925).

WHILE UNDER UTAH LAW, ALL OF THE TECHNICAL REQUIREMENTS FOR A SALE MAY HAVE BEEN MET, IN ACTUALITY, MR. RICE STILL RETAINS AN OWNERSHIP INTEREST, IN THE FORM OF LEGAL AND EQUITABLE TITLE, IN THE UTAH PROPERTY. HE AND HIS WIFE ARE THE GENERAL PARTNERS IN THE LIMITED PARTNERSHIP "2120 RIDGEWOOD" AND UNDER CALIFORNIA LAW, THEY ARE CO OWNERS AND HAVE A PROPERTY INTEREST IN THE SPECIFIC ASSETS OF THE PARTNERSHIP, THE UTAH PROPERTY. FURTHER, UNDER THE TERMS OF THE PROMISSORY NOTE DATED SEPTEMBER 11, 1981, IN THE EVENT THE LIMITED PARTNERSHIP FAILS TO PAY ANY MONTHLY INTEREST PAYMENT OR TO PAY THE PRINCIPAL BALANCE WHEN DUE, MR. RICE AND HIS WIFE MAY DECLARE THE PARTNERSHIP IN DEFAULT OF THE TERMS OF THE PROMISSORY NOTE AND, IN THEIR DISCRETION, MAY ELECT TO KEEP ALL PAYMENTS MADE TO THE DATE OF THE DEFAULT AND/OR MAY ELECT TO KEEP THE UTAH PROPERTY IN THEIR NAMES AND FOR THEIR INDIVIDUAL BENEFIT.

THUS, IT IS CLEAR THAT MR. RICE AND HIS WIFE HAVE RETAINED AN OWNERSHIP INTEREST, CONSISTING OF LEGAL AND EQUITABLE TITLE, IN THE UTAH PROPERTY. IN THE EVENT OF DEFAULT BY THE MEMBERS OF THE LIMITED PARTNERSHIP IN MAKING PAYMENTS UNDER THE TERMS OF THE PROMISSORY NOTE, THE EMPLOYEE AND HIS WIFE MAY ELECT TO KEEP THE PROPERTY IN THEIR NAMES AND FOR THEIR OWN INDIVIDUAL BENEFIT WITHOUT USING FORECLOSURE PROCEEDINGS. IN OUR OPINION, AND FOR PURPOSES OF REIMBURSEMENT BY THE FEDERAL GOVERNMENT, THERE WAS NO ACTUAL TRANSFER OF TITLE BECAUSE MR. AND MRS. RICE WERE BOTH SELLERS AND BUYERS. SUCH AN ARRANGEMENT DOES NOT QUALIFY AS A "SALE" OF A RESIDENCE WITHIN THE MEANING OF 5 U.S.C. SEC. 5724AA)(4) AND THE PROVISIONS OF FTR PARAGRAPH 2-6.1, SO AS TO ENTITLE MR. RICE TO REIMBURSEMENT OF THE CLAIMED REAL ESTATE EXPENSES.

ACCORDINGLY, REIMBURSEMENT OF THE CLAIMED REAL ESTATE EXPENSES IS NOT AUTHORIZED.