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Amount of
Year Claimed Loss Deductions
1991 $ 7,998,612
1992 7,234,627
1993 4,719,542
1994 3,973,023
1995 2,816,165
1996 3,120,934
1997 1,444,088
1998 1,750,240
1999 2,190,111
2000 1,861,149
$37,108,491
Discussion
The primary issues for decision involve a legal issue and a
factual issue, as follows: (1) Whether the basis step-up
provision of TRA 1986 is applicable to calculations of gain or
loss relating only to “sale or exchange” transactions and not to
calculations of loss relating to the “termination” of assets; and
(2) whether the specific and discrete fair market value, as of
January 1, 1987, of the 376 group contracts terminated in 1994
has been adequately established by petitioner for purposes of the
claimed loss deductions under section 165.
Construction of TRA 1986
As explained, supra, in conjunction with their conversion
from nontaxable to taxable status, Congress provided for Blue
Cross Blue Shield organizations a fair market value basis step-up
provision. The purpose of the basis step-up provision was to
prevent Blue Cross Blue Shield organizations from being taxed on
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