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1990, Otrabanda had received the $80 million cash portion of the
sale proceeds immediately prior to the end of its July 31, 1990
taxable year. Taking the position that the maximum period over
which payments could be received on the sale of the IBJ CDs was 6
years, Otrabanda applied 1/6th of its basis in the IBJ CDs in
computing its gain on the sale under section 15A.453-1(c),
Temporary Income Tax Regs. Otrabanda reported the sale of the
IBJ CDs on its Form 1065 for the tax year ended July 31, 1990, as
follows:
Cash Proceeds: $80,000,000
Cost: 100,000,000
Basis = 1/6 cost: (16,666,666)
Gain $63,333,334
Otrabanda allocated the gain reported on its Form 1065 for
the tax year ended July 31, 1990, among its partners (per
Schedule K-1s) as follows:
Percentage
Partner Interest Gain
Skokie 1.0 $633,333
Brunswick 9.0 5,700,000
Bartolo 90.0 57,000,001
Total 100.0 $63,333,334
The $63,333,334 that Otrabanda reported on its July 31, 1990 tax
return was not included in Otrabanda's audited and unaudited
financial statements for the year ended July 31, 1990.
Otrabanda invested the $80 million that it received on the
sale of the IBJ CDs in time deposits and commercial paper.
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