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the provisions of section 1374 applied to KRP’s sale of the gas
stations and that the built-in gain on the sale was $388,877.
Page 37 of the FSAA states that the “Taxpayer is also entitled to
a loss for 1995 equivalent to the amount of built-in gains
($136,107) that it is liable for.” The FSAA states that KRP (the
taxpayer) is liable for the tax. Petitioner characterizes this
language as an “aside comment”. We disagree and conclude that
respondent determined that “Pursuant to Code section 1366(f)(2),
KRP, Inc. [was] entitled to a loss equivalent to the amount of
built-in gains tax ($136,107) imposed with respect to its 1995
corporate income tax return Form 1120S” and that KRP was liable
for built-in gains tax of $136,107.
C. Is the Built-In Gains Tax a Subchapter S Item?
Petitioner contends that the built-in gains tax is not a
subchapter S item and the Tax Equity and Fiscal Responsibility
Act of 1982 (TEFRA), Pub. L. 97-248, 96 Stat. 324, audit and
litigation procedures do not apply to the built-in gains tax.
Respondent contends that the built-in gains tax is a subchapter S
item and the TEFRA audit and litigation procedures do apply.
1. N.Y. Football Giants, Inc. v. Commissioner
Before the issuance of N.Y. Football Giants, Inc. v.
Commissioner, 117 T.C. 152 (2001), petitioner filed a reply to
respondent’s response to motion for partial summary judgment
(reply) arguing that the decision in N.Y. Football Giants, Inc.
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