Coggin Automotive Corporation - Page 16

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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         
          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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