Salina Partnership LP - Page 34

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          increased FPL’s outside basis in its partnership interest, thereby          
          increasing Salina’s substituted basis in its assets following the           
          deemed termination of the partnership pursuant to section 1.708-            
          1(b)(1)(iv), Income Tax Regs.  Such an increase in Salina’s                 
          substituted basis would have virtually eliminated the short-term            
          capital gain that Salina reported following the closing of its              
          short position.                                                             
               Respondent relies upon Rev. Rul. 88-77, 1988-2 C.B. 128, and           
          the preamble to section 1.752-1T, Temporary Income Tax Regs., 53            
          Fed. Reg. 53143 (Dec. 30, 1988), in support of the proposition that         
          Salina’s obligation to close out its short sale (by returning               
          Treasury bills to ABN and Goldman Sachs) represents a partnership           

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