-255-
duplicating tax benefits. Respondent contends that Imperial
never intended to enter into a film finance business through
Corona. Petitioner contends that SMP and Imperial entered into
the Corona transaction with the bona fide business purpose of
film financing.
For the reasons discussed in more detail above, we conclude
that SMP had no basis in the $79 million receivable when it
contributed that receivable to Corona for a membership interest.
Consequently, SMP’s adjusted basis in its membership interest was
limited to its $250,000 cash contribution to Corona. Also, since
SMP had no basis in the $79 million receivable on its
contribution, Corona did not obtain any basis in that receivable
under section 723 when the receivable was contributed. Because
SMP did not receive a substituted basis in its membership
interest equal to the purported basis that it claimed in the $79
million receivable and because Corona did not receive any
carryover basis in the $79 million receivable, SMP is not
entitled to the substantial losses that it claimed from the sales
of its Corona membership interests to Imperial, and Corona is not
entitled to the substantial loss that it claimed from the sale of
the $79 million receivable to TroMetro. This analysis
effectively disposes of the issues relating to the Corona
transaction; however, for sake of completeness, we shall briefly
Page: Previous 245 246 247 248 249 250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 NextLast modified: May 25, 2011