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The phrase "sale or exchange" appears in several tax
statutes and has been the subject of numerous opinions. The
customary meaning of "sale or exchange" implies a reciprocal
transfer. Helvering v. William Flaccus Oak Leather Co., 313 U.S.
247, 249 (1941). The phrase "sale or exchange" has been
interpreted in some circumstances to include a distribution of
partnership property in liquidation of a partnership interest.
However, a partnership distribution does not necessarily qualify
as a sale or exchange. For example, a liquidating distribution
of a 50-percent or more partnership interest is not treated as a
sale or exchange of the partnership interest for purposes of a
section 708(b)(1)(B) constructive termination. Sec. 1.708-
1(b)(1)(ii), Income Tax Regs. Whether a partnership distribution
is a sale or exchange of the distributed partnership property
depends on the statutory mandate of the section sought to be
applied to the particular subchapter K transaction.
Respondent's second or alternative argument to apply section
1056 to subchapter K transactions would raise difficult and yet
unanswered questions, such as whether the partnership or selling
partner should be considered to be the transferor of the assets
for purposes of section 1056. Under respondent's view, the
buying partner's basis would be limited to the terminated
partnership's presale basis plus gain recognized by the selling
partner (Kaiser) on the player contracts. Section 1056(a) limits
the buyer's basis in player contracts to the transferor's basis
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