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of the tax liability of * * * [Transco] and * * *
[ANR].
Partnership’s Return Position and Respondent’s Determinations
On its 1987 Form 1065, U.S. Partnership Return of Income,
the partnership reported that the “partial foreclosure sale” of
the coal gasification plant became final on November 2, 1987, the
date the Supreme Court denied the petition for a writ of
certiorari. On its 1987 return, the partnership reflected
income, deductions, losses, and tax credits from the project on
the basis that its ownership of the plant ended November 2, 1987,
reported gains and losses resulting from the “partial foreclosure
sale”, and reported basis of foreclosed assets to enable the
partners to determine recapture of tax credits. The partnership
reported $1 billion as the proceeds from the “partial foreclosure
sale”. In a disclosure statement, the partnership stated that it
was treating the $1 billion foreclosure sale price as “the amount
of the taxpayer’s nonrecourse indebtedness that was discharged as
a result of the disposition of certain assets by the foreclosure
sale”. The partnership asserted that DOE was continuing to
assert a claim against the partnership for approximately $681
million.22
By four separate notices of final partnership administrative
adjustments (FPAA) issued May 24, 2001, respondent took
22 We infer that this amount included interest on the debt.
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