- 16 - him under section 721--to Coastal of that interest,11 with the remaining $500,000 of mortgage loan proceeds being used to discharge the portion of the transaction expenses and preexisting liabilities attributable to his 25-percent undivided interest received from Pecaris and contributed to Coastal. Under petitioners' view, Pecaris was entitled to use 75 percent of its adjusted basis in the Mall in computing its gain on the receipt of the reduced purchase price of $3.6 million for the 75-percent undivided interest that it sold and the distributive shares of such gain to Messrs. Boyas and Spillas. Applying petitioners' view, those shares of gain would remain the same as reported by Pecaris and Messrs. Boyas and Spillas on their returns, and no part of the Pecaris gain would be allocable to petitioner. Also, under petitioners' view, the remaining 25 percent of the Pecaris adjusted basis in the Mall is attributable to the undivided 25-percent interest therein that petitioner claims was distributed to him by Pecaris and contributed by him to the capital of Coastal. 11The rationale of allowing nonrecognition treatment to petitioner under secs. 721 and 731 of the continuation and expansion of his residual partnership interest in the Mall would be that he did not liquidate his investment in the Mall but rather continued it in another form, with a greater proportionate interest, subject to nonrecourse liabilities that were substantially increased both proportionately and absolutely. See sec. 1.1002-1(c), Income Tax Regs.Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
Last modified: May 25, 2011