129 T.C. No. 3
UNITED STATES TAX COURT
MICHAEL V. DOMULEWICZ AND MARY ANN DOMULEWICZ, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10434-05. Filed August 8, 2007.
As part of a Son-of-BOSS transaction designed to
create a basis of approximately $29.3 million in
publicly traded stock purchased at a relatively minimal
cost, P entered into a short sale of U.S. Treasury
notes and contributed the proceeds of that sale and the
related obligation to a partnership (DIP) in which P
was one of three partners. Neither P nor DIP treated
the obligation assumed by DIP as a liability under sec.
752, I.R.C., and P did not compute his basis in DIP by
taking the obligation into account. After DIP
satisfied the obligation and received contributions of
the publicly traded stock from its partners, the
partners transferred their interests in DIP to DII, an
S corporation of which they were shareholders. The
transfer of partnership interests was followed by DII’s
receipt of DIP’s distributed assets; i.e., the stock
and cash. DII sold the stock and claimed a resulting
capital loss of $29,306,024. On Ps’ 1999 Federal
income tax return, P claimed his $5,858,801 share of
the reported loss as a passthrough capital loss from
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Last modified: November 10, 2007