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Treasury bills, Salina had a legally enforceable financial
obligation to return the borrowed Treasury bills to Goldman Sachs
and ABN. Significantly, Salina reported the obligation as a
liability on its opening balance sheet.
Consistent with the preceding discussion, we sustain
respondent’s adjustment to Salina’s tax return inasmuch as Salina’s
partners were required to increase their outside bases in their
partnership interests to reflect their pro rata shares of the
aforementioned liability.
A final matter. Petitioner observes that section 1.708-
1(b)(1)(iv), Income Tax Regs., was amended effective May 8, 1997,
to eliminate the basis adjustment provision underlying the present
dispute.13 Because the regulation was amended prospectively, it is
of no aid to this Court in deciding the question presented in this
case. See, e.g., Compaq Computer Corp. & Subs. v. Commissioner,
113 T.C. 214, 225-226 (1999).
Under the circumstances, we need not consider the parties’
remaining arguments. To reflect the foregoing, and the agreement
of the parties, see supra note 2,
Decision will be entered
13 Pursuant to an amendment to sec. 1.708-1(b)(1)(iv),
Income Tax Regs., effective May 8, 1997, constructive partnership
terminations are no longer treated as deemed distributions of
partnership assets. Pursuant to the amendment, the new
partnership is now required to take a carryover basis from the
old partnership.
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