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ended February 28, 1991, as the elimination of OIP's 50-percent
interest in Sandlake and the realization by OIP of a deferred
gain under section 1033 in the amount of $819,566.
Notice of Deficiency
In the notice of deficiency (notice) issued to petitioners,
respondent determined, inter alia, that the aggregate gains
realized by OIP, and not just the boot reported by petitioners,
on its sales of lots 11 and 12 and OIP's 25-percent interests in
lots 14 and 15 during the taxable year ended February 28, 1991,
must be recognized and included in petitioners' consolidated
return for that year because those gains do not qualify for
nonrecognition treatment under section 1031. Respondent also
determined in the notice that the gain realized by OIP as a
result of the condemnation transaction must be recognized and
included in petitioners' consolidated return for the taxable year
ended February 28, 1991, because that gain does not qualify for
nonrecognition treatment under section 1033.
Respondent further determined in the notice, inter alia,
that petitioners are liable for all the taxable years at issue
except the taxable year ended February 28, 1993, (1) for addi-
tions to tax under section 6651(a)(1) for failure to file timely
their consolidated returns for those years and (2) for accuracy-
related penalties under section 6662(a) because of negligence or
disregard of rules and regulations.
OPINION
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