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to selling the dealership and filed a lawsuit seeking to block the
proposed sale. Settlement negotiations followed, and ultimately,
Mr. Andrews agreed to sell his 50-percent interest in the Coggin-
Andrews partnership to petitioner and Asbury for approximately $7.3
million.
Notices of Deficiency
In two notices of deficiency3 (one regarding tax year ended
June 26, 1993, and the other regarding tax years ended December 31,
1993, 1994, and 1995), respondent determined that pursuant to
section 1363(d), petitioner’s conversion to an S corporation
triggered the inclusion of the affiliated group’s pre-S election
LIFO reserves ($5,077,808) into petitioner’s gross income.
Respondent’s primary position was that the 1993 restructuring
should be disregarded because it had no tax-independent purpose.
Alternatively, respondent maintained that under the aggregate
approach of partnerships a pro rata share ($4,792,372) of the pre-S
election LIFO reserves was attributable to petitioner. Respondent
3 Before the issuance of the notices of deficiency,
respondent’s National Office issued a technical advice
memorandum, Tech. Adv. Mem. 97-16-003 (Sept. 30, 1996), which
concluded that petitioner would be subject to LIFO recapture
pursuant to sec. 1363(d) as a consequence of a change in its and
its subsidiaries’ structure.
Technical advice memorandums are not binding on us. We
mention the issuance of the technical advice memorandum solely
for the sake of completeness.
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