-22-
C. Respondent's Contentions
Respondent asserts that the comparative liquidation test of
section 1.704-1(b)(3)(iii), Income Tax Regs., supports the
allocation of all partnership income to Mr. Manchester, as set
forth in the FPAA. First, respondent contends that if all IHCL's
assets had been sold at the end of 1990, the net liquidation
proceeds would have been $8,958,778. This amount, using stipulated
figures, is computed as follows:
Assets:
Cash $7,955,796
Investment in Landmark (1,358,431)
Investment in Gateway 2,328,218
Unamortized organization costs 139,388
Total assets $8,964,971
Liabilities:
Accounts payable (6,193)
Total liabilities (6,193)
Net proceeds 8,958,778
1 On brief, respondent eliminated the unamortized
organization costs; thus, respondent's figures for total assets and
net proceeds are $39,388 less than indicated above. Without
passing upon the correctness of this omission, we have included
these costs in order to make respondent's and petitioner's figures
more easily comparable.
Next, respondent contends that if all the IHCL assets
had been sold at the end of 1991, the net liquidation proceeds
would have been $10,449,135. This amount is computed as follows:
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