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short sale is closed, to clarify and simplify the tax treatment of
a transaction that is something of a hybrid. See Hendricks v.
Commissioner, 423 F.2d 485, 486-487 (4th Cir. 1970), affg. 51 T.C.
235 (1968). In contrast, the basis adjustment provisions contained
in subchapter K, including sections 705 and 752, are intended to
avoid distortions in the tax reporting of partnership items by
promoting parity between a partnership’s aggregate inside basis in
its assets and its partners’ outside bases in their partnership
interests. For present purposes, we observe that the provisions of
sections 1233 and 752 are mutually exclusive. In other words, the
conclusion that a partnership’s short sale of securities creates a
partnership liability within the meaning of section 752 (thereby
increasing the partners’ outside bases in their partnership
interests) does not create tension or conflict with the deferred
recognition of gain or loss prescribed for short sale transactions
under section 1233.
Further, we are not persuaded that the Commissioner’s position
in Rev. Rul. 95-26, supra, conflicts with Rev. Rul. 73-301, supra,
or the Court’s holding in Helmer v. Commissioner, supra. The
pertinent facts in Rev. Rul. 73-301, supra, are as follows: During
1971, ABC partnership, which reported its income on the completed
contract method, was awarded a 2-year contract for the construction
of a building. During 1971, ABC had performed all the services
required under the contract in order to be entitled to receive
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