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The partnership unsuccessfully contested the foreclosure
proceedings in litigation which concluded in November 2, 1987,
when the U.S. Supreme Court denied the petition for writ of
certiorari. For Federal income tax purposes, the partnership
reported disposing of the project assets as of that date.
By four separate notices of final partnership administrative
adjustments (FPAA), respondent took alternative “whipsaw”
positions, determining that the partnership had engaged in a sale
or exchange of the plant and related assets as of various dates
in 1985, 1986, 1987, and 1988. Respondent determined that, as of
these various alternative dates, the partners must recapture
previously claimed investment and energy tax credits, forfeit
certain deductions and losses relating to the project, and
recognize gain from disposition of project assets.
The primary issue for decision is whether for Federal income
tax purposes the partnership should be treated as disposing of
the project assets before November 2, 1987. We must also decide
whether the partnership must take into account the full $1.57
billion debt in the year in which the partnership disposed of the
project assets pursuant to the foreclosure sale.
3(...continued)
of the stock that one partner’s parent company had pledged as
security for the loan guarantee.
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