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Medical neither was a party to the Agro Science Co. litigation
nor agreed to be bound by our opinion in Agro Science Co. The
Agro Science Co. case was not decided until after the period of
limitations for Spencer Medical's 1983 tax year had expired.
Spencer Medical timely executed a Consent to Extend the Time
to Assess Tax Attributable to Items of a Partnership for 1990,
extending the time for such assessment to June 30, 1995.
Respondent timely sent to Spencer Medical a FPAA for 1990.
OPINION
Respondent determined that Spencer Medical realized foreign
currency transaction gain in 1990 due to the devaluation of the
Brazilian cruzeiro between 1983 and 1990. Respondent's
adjustments are based on treating the Coral note as bona fide
indebtedness. Petitioner argues that respondent's determination
is incorrect because promissory notes similar to the Coral note
on which she based her adjustments were determined in Agro
Science Co. v. Commissioner, supra, to be invalid. Thus,
petitioner contends that it can have no foreign currency
transaction gain because the Coral note is invalid. Respondent
does not deny that, in Agro Science Co., certain Coral notes were
determined to be invalid. Respondent argues that she relied on
Spencer Medical's 1983 return, wherein the Coral note was treated
as valid and research expenses equaling the 1983 value of the
Coral note (US$3.2 million) were deducted, and that Spencer
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