Robert K. and Dawn E. Lowry - Page 7

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                    The subject property has previously been                          
               transferred to Lowry Wells Limited Liability Company                   
               pursuant to a tax-free partnership division under IRC                  
               �708(b)(2)(B).                                                         
                    Lowry Wells Limited Liability Company will                        
               correctly report this 1994 event on a 1994 return and                  
               realize and recognize any gains (or losses) as is                      
               appropriate in that filing.                                            
               There is nothing in the record to indicate that any property           
          was ever transferred to Lowry Wells Limited Liability Company               
          (LLC).                                                                      
               Petitioners were advised by Rob Lambert in a Memorandum                
          dated August 29, 1994, to file the 1993 Amended tax return with             
          the expectation that the LLC would “hopefully” be treated as                
          having corporate entity characteristics, but would preserve the             
          passthrough attributes of a traditional partnership.  This was              
          based on the assumption that at the time of delivery of the deed            
          by the LLC, the LLC would be insolvent for purposes of section              
          108, so that most of the gain realized on the Fitch Property                
          transaction would be treated as cancellation of indebtedness                
          income and therefore not taxable.  At the time this advice was              
          given, the Fitch Property transaction had already closed (on May            
          27, 1994), and the Certificate of Limited Liability Company for             
          LLC had yet to be filed, which in fact took place on September              
          19, 1994.  The Fitch Property was conveyed to AAL by the                    
          Partnership, not by the LLC.                                                








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