- 47 - 3-week period since the issuance of the LIBOR Notes, which caused them to lose value. 6. Tax and Financial Accounting for the Results For Federal income tax purposes, ACM treated the sale of the Citicorp Notes as a contingent payment sale, governed by section 15a.453-1(c)(3), Temporary Income Tax Regs., 46 Fed. Reg. 10714 (Feb. 4, 1981). As there was no stated maximum selling price and all payments on the LIBOR Notes would be received over a fixed period of 6 taxable years, ACM recovered its basis in the Citicorp Notes ratably over 6 years. On Form 1065, U.S. Partnership Return of Income, for FYE 11/30/89, the partnership reported capital gain of $110,749,239.10 The gain was allocated among the partners in proportion to their capital accounts as shown on the November 30, 1989, revaluation worksheet: $91,516,689 to Kannex, $18,908,407 to Southampton, and $324,144 to MLCS. The parties to this proceeding have agreed that the partnership's tax basis in the LIBOR Notes immediately after the sale was $146,253,803, an amount that exceeded the cost of the Notes by the gain recognized on the sale. 10 ACM computed the gain as follows: Payments received in FYE 11/30/89 $140,000,000 Basis recovered in FYE 11/30/89 Citicorp Note basis plus accrued interest 175,504,564 Portion allocable to FYE 11/30/89 (1/6) (29,250,761) Capital gain 110,749,239Page: Previous 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 Next
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