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Amounts received by Aminoil
under paragraph 178(3):
Oil Inventory $10,885,500
Other Assets 19,080,500
Fixed Assets 176,075,000
Subtotal 206,041,000
Less Aminoil’s liabilities to
Kuwait:
Per concession agreement 32,228,500
Per Abu Dhabi Formula 71,963,000
Due third parties 18,849,500
Subtotal 123,041,000
Total 83,000,000
Plus Amounts received by Am-
inoil under paragraph 178(5):
7.5% component 41,602,829
10.0% component 55,147,935
Subtotal 96,750,764
Payment received from Kuwait 179,750,764
Petitioner reported the $55,147,935 identified as the
“10% Component” (and by the Tribunal as the “level of inflation”
adjustment) as an amount realized on a sale or other disposition
of the concession. Since petitioner believed that Aminoil’s
adjusted basis in the concession was zero, petitioner reported a
gain of $55,147,935. Petitioner reported that gain as a long-
term capital gain under the authority of section 1231.
Respondent determined a deficiency in petitioner’s
consolidated income tax liability for 1982 based, in part, on an
adjustment treating the “level of inflation” adjustment not as an
amount realized on the sale or disposition of property but,
rather, as ordinary income.
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