New York Football Giants, Inc. - Page 3

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          section 1374 for fiscal years 1996 and 1997 is a subchapter S               
          item that must be determined in a unified audit and litigation              
          procedure for an S corporation.  Petitioner contends that the               
          built-in gains tax is not a subchapter S item.  As discussed                
          below, we agree with respondent.                                            
               Section references are to the Internal Revenue Code, unless            
          otherwise indicated.                                                        
               Petitioner is a corporation the principal place of business            
          of which was in East Rutherford, New Jersey.  Petitioner was                
          incorporated in 1929 and owns and operates the New York Giants, a           
          professional football franchise in the National Football League             
               In 1990, the NFL began exploring the possibility of                    
          expansion and began considering various franchise applications.             
               Petitioner elected on March 1, 1993, to be treated as an S             
          corporation under section 1361(a)(1).  Later in 1993, the NFL               
          awarded new franchises to Charlotte and Jacksonville.  The                  
          expansion agreements required the new franchises to pay expansion           
          payments (in six installments) to petitioner and the member teams           
          of the NFL.                                                                 
               Petitioner reported its share of the NFL expansion payments            
          as capital gains (not subject to the built-in gains tax imposed             

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