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gain is recognized to the partner pursuant to section 731(a)(1).
If a transaction gives rise to both an increase and a decrease in
the partner’s share of partnership liabilities or the partner’s
individual liabilities, only the net decrease is treated as a
distribution of money to the partner by the partnership. Sec.
1.752-1(f), Income Tax Regs.
2. Basis Issues
As noted supra, the FPAA seeks to deny Countryside a basis
step-up for its property remaining after the distribution to Mr.
Winn and Mr. Curtis,7 and it also challenges the recognition of
MP as holder of the AIG notes with a basis equal to the purchase
price of the notes. Although those basis issues are not
addressed in the motion, respondent describes them as “integrally
related to the section 731 and section 752 issues”, and he cites
the totality of the transactions described supra, and the
elections giving rise to the basis results, as constituting “an
abusive tax avoidance result” (i.e., the indefinite or, possibly,
permanent nonrecognition of the gain on the sale of Countryside’s
assets), which should not be given effect. Because respondent’s
position in opposition to the motion relies, in part, upon the
alleged abusiveness of the combination of gain not being
recognized to Mr. Winn and Mr. Curtis, the basis step-up of
7 Schedule L, Balance Sheets per Books, included in
Countryside’s 2000 Form 1065, U.S. Return of Partnership Income,
on lines 9a and 11, reflects an $11,450,498 “step-up” in
Countryside’s bases for its “Buildings and other depreciable
assets” and its land ($11,655,277 total yearend basis increase
less $204,779 attributable to amounts expended for depreciable
property during 2000).
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Last modified: March 27, 2008