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under section 453(b). Saba computed its gain on the sale through
a ratable allocation (or recovery) of its basis in the Chase PPNs
under section 15A.453-1(c), Temporary Income Tax Regs., 46 Fed.
Reg. 10711 (Feb. 4, 1981).
Although the Fuji and Norinchukin LIBOR notes provided for
20 quarterly payments to be paid over a 5-year period beginning
July 2, 1990, Saba had received the $160 million cash portion of
the sale proceeds immediately prior to the end of its March 31,
1990 taxable year. Taking the position that the maximum period
over which payments could be received on the sale of the Chase
PPNs was 6 years, Saba applied 1/6th of its basis in the Chase
PPNs in computing its gain on the sales under section 15A.453-
1(c), Temporary Income Tax Regs., supra. Saba reported the sale
of the Chase PPNs on its Form 1065 for the year ended March 31,
1990, as follows:
Cash Proceeds: $160,000,000
Cost: 200,000,000
Basis = 1/6 cost: 33,333,333
Gain: $126,666,667
Saba allocated the gain reported on its Form 1065 for the
tax year ended March 31, 1990, among its partners (per its
Schedule K-1s) as follows:
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