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sports enterprise" within the meaning of section 1056(a). There
was little dispute by the parties about the transactional facts.
Upon the transfer of the partnership interest from Kaiser to
Bowlen, Bowlen I adjusted its basis in the player contracts to a
value of approximately $36 million in accordance with the
mandatory basis adjustment rules of section 732(d), accompanying
regulations, and related statutes.7 Bowlen I adjusted its basis
in the player contracts without regard to whether Kaiser
recognized gain from the player contracts.
Respondent determined that the partnership's basis in the
player contracts acquired with the Broncos franchise is limited
by section 1056(a), i.e., that the basis of the player contracts
is limited to the presale partnership basis in the player
contracts ($6,510,555) plus any gain that Kaiser recognized on
the sale of his partnership interests allocable to the player
contracts. Respondent's determination must be based on the
inferential premise that section 1056(a) applies to the indirect
purchase and sale of a sports franchise held in partnership form.
As there is no evidence that Kaiser recognized gain from the
player contracts, respondent also maintains that the basis in the
7 It is noted that the $36 million basis for the player
contracts would have fallen within the sec. 1056(d) presumption
provision that no more than 50 percent of the total purchase
price of a sports team is to be allocable to player contracts.
If sec. 1056 applied here, the partnership would not have been
statutorily required to establish to respondent’s satisfaction
the portion of the basis allocation in excess of 50 percent to
respondent's satisfaction.
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Last modified: May 25, 2011