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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