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gain to the partners also increases the partners' exposure to
income taxation on the amounts of the gain.
3. Petitioner's Application of Minimum Gain
Provisions to a Tiered-Partnership Allocation
Petitioner maintains that the minimum gain chargeback
provisions of section 6.5 in the IHCL Restated Agreement would
require IHCL to realize approximately $7 million in minimum gain
chargebacks in the deemed liquidation. Petitioner's assertion is
based on the following theory: although IHCL owned no nonrecourse
property itself, it had ownership interests in PLH and PGL, which
4(...continued)
Income Tax Regs., 53 Fed. Reg. 53163 (Dec. 30, 1988), provides:
(e) Minimum gain chargeback--(1) In general. If
there is a net decrease in partnership minimum gain for
a partnership taxable year, the partners must be
allocated items of partnership income and gain in
accordance with this paragraph (b)(4)(iv)(e) ("minimum
gain chargeback").
(2) Allocations required pursuant to minimum gain
chargeback. If a minimum gain chargeback is required
for a partnership taxable year, then each partner must
be allocated items of income and gain for such year
(and, if necessary, for subsequent years) in proportion
to, and to the extent of, an amount equal to the
greater of--
(i) The portion of such partner's share
of the net decrease in partnership minimum
gain during such year that is allocable to
the disposition of partnership property
subject to one or more nonrecourse
liabilities of the partnership; or
(ii) The deficit balance in such
partner's capital account at the end of such
year * * *
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