timberlands and the land development and resort businesses are
collectively referred to as the “Washington properties”. In Pope
& Talbot II, we held that the fair market value of the Washington
properties was $48.5 million on the date of distribution.
In addition to the Washington properties, petitioner
transferred $1.5 million in cash to the Partnership for working
capital and sold certain installment notes receivable to the
Partnership for approximately $4.9 million in cash. The
Partnership issued partnership units to each owner of
petitioner's common stock on a pro rata basis. Petitioner
incurred $1,364,071 in legal, accounting, investment banking, and
other fees relating to the formation of the Partnership, the
transfer of the Washington properties, and the distribution of
the partnership units. In Pope & Talbot II, we held that
petitioner can offset these fees against the section 311(d) gain
it realized on the distribution of the Washington properties. We
directed that decision be entered pursuant to Rule 155.
Both parties have submitted Rule 155 computations. The
parties are in agreement regarding the computation for
petitioner's 1986 taxable year. The parties are also in
agreement regarding the computation for petitioner's 1985 taxable
year, except for the following two items: (1) Petitioner
maintains that the $1.5 million of working capital is included in
the fair market value of $48.5 million for the Washington
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