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liability within the meaning of section 752.7 Although
acknowledging that Salina’s obligation to replace the borrowed
securities was secured under the Salina/ABN master repurchase
agreement (under which Salina lent $343,875,000 to ABN and ABN
collateralized its loan with the Treasury bills that Salina sold
short), respondent asserts that Salina incurred an obligation in
the amount of $344 million that should be considered a liability
under section 752(a).
The various provisions of subchapter K of the Code blend two
approaches, the entity and the aggregate approaches, for taxation
of partnerships and partners. See Coggin Automotive Corp. v.
Commissioner, 115 T.C. ___ (2000) (slip. op. at 21); see also S.
Rept. 1622, at 89-100, 83d Cong., 2d Sess. (1954). The entity
7 The portion of the preamble to sec. 1.752-1T, Temporary
Income Tax Regs., 53 Fed. Reg. 53143 (Dec. 30, 1988), that
respondent relies upon states in pertinent part:
The allocation of partnership liabilities among
the partners serves to equalize the partnership’s basis
in its assets (“inside basis”) with the partners’ bases
in their partnership interests (“outside basis”). The
provision of additional basis to a partner for the
partner’s partnership interest will permit the partner
to receive distributions of the proceeds of partnership
liabilities without recognizing gain under section 731,
and to take deductions attributable to partnership
liabilities without limitation under section 704(d)
(which limits the losses that a partner may claim to
the basis of the partner’s interest in the
partnership). By equalizing inside and outside basis,
section 752 simulates the tax consequences that the
partners would realize if they owned undivided
interests in the partnership’s assets, thereby treating
the partnership as an aggregate of its partners. [T.D.
8237, 1989-1 C.B. 180, 182.]
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