-224-
transferring inside basis to another partner. Indeed, the
purpose of section 704(c) is to prevent the shifting of tax
consequences among partners with respect to precontribution gain
or loss, sec. 1.704-3(a)(1), Income Tax Regs., and not to
perpetrate a massive shift in basis from transitory “partners” to
other partners as part of a transaction lacking economic
substance.
The purpose for the CDR transaction was purely and simply to
transfer built-in losses from CDR to the Ackerman group. CDR
wanted to realize some amount on the banks’ built-in losses. The
Ackerman group wanted to acquire the built-in losses to exploit
the tax attributes. To these ends, the parties entered into a
prearranged series of transactions wherein the banks contributed
high-basis assets to SMP in exchange for preferred interests in
that company and then immediately sold their preferred interests
to the Ackerman group.
Notwithstanding its form, the transaction did not, in
substance, represent contributions of property in exchange for
partnership interests, ingredients obviously contemplated in
sections 704(c) and 723. The contribution provisions of
subchapter K do not contemplate giving effect to a transitory
partnership “contribution” that has no economic significance
apart from trafficking in tax attributes. Cf. United States v.
Stafford, 727 F.2d 1043, 1048 (11th Cir. 1984) (stating that the
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