Salina Partnership LP - Page 1

                                 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

Last modified: May 25, 2011