Robert J. Goldberg and Bradley A. Morgan - Page 4




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               2.   It is further determined that the loss deduction                  
               claimed on your 2001 federal income tax return is                      
               disallowed because Alameda Investments, LLC with                       
               reference to which you determined basis in the                         
               derivative security sold is a sham and should not be                   
               recognized for federal income tax purposes.                            
               3.   It is further determined that the deduction of                    
               $1,657,609 claimed as a loss for the tax year 2001 is                  
               disallowed because you have failed to establish the                    
               basis in the partnership interest in Alameda                           
               Investments, LLC was greater than zero.  You have also                 
               failed to establish the basis in the derivative                        
               securities sold or disposed of was greater than zero                   
               ($0).                                                                  
               4.   It is further determined that the deduction for                   
               the loss claimed is disallowed to the extent that the                  
               provisions of Chapter 1, Subchapter K of the Internal                  
               Revenue Code were used to calculate basis in the                       
               Property sold.  Alameda Investments, LLC was formed or                 
               availed of in connection with a transaction or                         
               transactions in taxable year 2001 a principal purpose                  
               of which was to reduce substantially the present value                 
               of your federal tax liability in a manner that is                      
               inconsistent with the intent of Subchapter K of the                    
               Internal Revenue Code.  The manner in which you and                    
               Alameda Investments, LLC accounted for the derivative                  
               securities transaction in question violated the intent                 
               of Subchapter K.  Accordingly, the parties’ accounting                 
               for the transaction should be adjusted, pursuant to the                
               authority contained in Treas. Reg. § 1.701-2, to                       
               achieve results that are consistent with the intent of                 
               Subchapter K by ignoring the existence of the                          
               partnership, or treating transactions purportedly                      
               engaged in by the partnership as engaged in directly by                
               the purported partners.                                                
               5.   It is further determined, in the alternative, that                
               the loss claimed on your 2001 federal income tax return                
               should be decreased to reflect the limitation on your                  
               adjusted basis in your partnership interest resulting                  
               from your contribution of your position(s) in the                      
               securities transaction(s) to the partnership, pursuant                 
               to Treas. Reg. § 1.752-6T.                                             
               6.   It is further determined, in the alternative, that the            
               loss claimed on your 2001 federal income tax return should             






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Last modified: November 10, 2007