-259-
respondent has met his burden of proof on this issue.179 Because
we decide, on alternative grounds, that SMP obtained no bases in
the SMHC receivables, this conclusion does not ultimately affect
our decision.
VIII. Summary of Conclusions So Far
We conclude that the banks’ contribution of the SMHC
receivables to SMP lacked economic substance and cannot be
respected for Federal tax purposes. We also conclude that SMP
obtained no basis in the SMHC receivables under section 723
(because the receivables were worthless) or in the $79 million
receivable (because that debt did not represent bona fide
indebtedness when it was assumed by MGM Group Holdings). In
addition, we conclude that the Corona transaction lacked economic
substance and likewise cannot be respected for Federal tax
purposes. For these reasons, we conclude: (1) SMP had no basis
in the $150 million receivable and the $81 million receivable
when those receivables were sold to TroMetro in 1997 and 1998;
(2) SMP had no basis in the $79 million receivable when it
contributed that receivable to Corona in 1997, and SMP’s basis in
its Corona membership interest under section 722 was limited to
the $250,000 cash contribution that it made to Corona; and (3)
Corona obtained no basis from SMP under section 723 in the $79
179 Respondent’s argument was raised as new matter in the
amendment to answer. Consequently, respondent bears the burden
of proof as to this issue. Rule 142(a).
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