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contracts, were premised on the assumption that the mandatory
basis adjustment rules of section 732(d) applied.
Bowlen I began amortizing the player contracts on June 1,
1984, using a 5-year useful life. After assigning values to the
partnership's assets other than the NFL Broncos franchise, the
partnership assigned the residual amount of Bowlen and Adams'
basis in their partnership interests to the franchise. Bowlen I
did not make a section 754 election in 1984. During 1984 through
1988, Bowlen I reported amortization expenses and writeoffs of
the player contracts in issue in excess of $34 million.
In September 1985, P.D.B. Enterprises, Inc. (Bowlen III),
purchased Adams' 39.2-percent partnership interest in Bowlen I
for $20 million. Bowlen III was wholly owned by Bowlen II.
During the years in issue, Bowlen I was owned as follows:
Partner Percentage Ownership Type of Interest
Bowlen II 60.8 General partner
Bowlen III 39.2 Limited partner
When the 60.80-percent partnership interest in Bowlen I was
originally purchased, Kaiser did not provide Bowlen with
information about whether Kaiser recognized any gain attributable
to the player contracts. Nor did Bowlen ask Kaiser for such
information. No evidence was presented at trial by either party
about the amount of gain recognized by Kaiser from the sale of
his partnership interest to Bowlen or the portion of that gain
attributable to player contracts. Evidence of the gain
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