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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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