T.C. Memo. 2000-352 UNITED STATES TAX COURT SALINA PARTNERSHIP LP, FPL GROUP, INC., A PARTNER OTHER THAN THE TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 25084-96. Filed November 14, 2000. In 1991, FPL incurred a substantial capital loss on the sale of a subsidiary. In December 1992, GS, an investment bank, persuaded FPL to invest in a domestic limited partnership, S, newly formed at GS’s request by two affiliates of ABN, an international bank based in The Netherlands. S, at GS’s suggestion, took a substantial short position in U.S. Treasury bills. FPL purchased a 98-percent limited partnership interest in S to take advantage of desired tax benefits and to enhance its return on its short-term, fixed-income investments. Immediately following FPL’s investment, S closed its short position in U.S. Treasury bills. Relying on a series of complex partnership basis adjustment provisions, S concluded that it realized a $344 million short-term capital gain, of which $337 million was allocated to FPL. FPL thereupon claimed a capital loss carryover from 1991 to offset nearly all of its distributive share of S’s capital gain.Page: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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