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Opinion
1. Mechanics of a Contingent Payment Sale ......... 83
2. Economic Substance ................... 85
a. Introduction .................... 85
b. Profit ....................... 98
c. Hedging Within the Four Corners
of the Partnership ................. 113
d. Interim Use for Idle Cash ............. 133
e. The Pattern of Ostensibly Market-Driven
Decisions ..................... 137
MEMORANDUM FINDINGS OF FACT AND OPINION
LARO, Judge: ACM Partnership (ACM or the partnership),
Southampton-Hamilton Co. (Southampton), Tax Matters Partner,
petitioned the Court under section 6226 to readjust respondent's
adjustments of partnership items flowing from the partnership.
Respondent issued ACM a notice of final partnership
administrative adjustment (FPAA) that reflects adjustments to
ACM's partnership return of income for its taxable years ended
November 30, 1989 (FYE 11/30/89), November 30, 1990
(FYE 11/30/90), November 30, 1991 (FYE 11/30/91), and
December 31, 1991 (FYE 12/31/91). In relevant part, respondent
eliminated the capital gain reported by ACM in FYE 11/30/89 as
resulting from the transaction described herein, and she
disallowed the corresponding capital loss reported in FYE
12/31/91.
Respondent asserted a number of alternative theories in the
FPAA to support the adjustments. Primarily, respondent asserted,
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