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St. Louis Pipeline’s debt to Tampa Pipeline Company
* * * [by] reducing the amount Tampa Pipeline owed him.
Tampa Pipeline recorded the 1995 transaction by a
journal entry reducing by $800,000 the amount which it
owed Rose and the amount which St. Louis Pipeline owed
Tampa Pipeline. St. Louis Pipeline also recorded the
transaction in a journal entry, reducing its
indebtedness to Tampa Pipeline by $800,000, and
increasing its indebtedness to Rose by $800,000.
The transaction was recorded in the audited
financial statements and the tax returns for 1995.
In further support of this contention, petitioners argue that the
transactions between SLPC, TPC, and Rose were more than mere book
entries and “that a change in Rose’s rights to repayment has, in
fact, occurred”. Petitioners cite only Rev. Rul. 75-144, 1975-1
C.B. 277, in support of their contention. Conversely, respondent
contends that the Roses’ basis in their SLPC interest should not
be increased as a result of the $350,000 transaction that
occurred between SLPC, TPC, and Rose during 1994 and the $800,000
transaction that occurred between SLPC, TPC, and Rose during
1995. In support of this contention, respondent argues that the
transactions between SLPC, TPC, and Rose during 1994 and 1995
“were merely book entries, lacking economic substance of any
sort.” As discussed below, we agree with respondent.
We are unpersuaded that the quoted stipulation is any kind
of concession on the part of respondent. The stipulation merely
outlines the manner in which the transactions between SLPC, TPC,
and Rose during 1994 and 1995 were recorded on the books of SLPC
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