- 6 -
and petitioner sold them on July 7, 1999, for $5,791,057.06
(inclusive of $31,614.75 of accrued interest). On July 8, 1999,
petitioner contributed to DIP the proceeds of the short sale, the
obligation to satisfy the short sale, and $116,000 in “margin
cash”. Neither petitioner nor DIP treated the short sale
obligation assumed by DIP as a liability under section 752, and
petitioner did not compute his basis in his interest in DIP by
taking that obligation into account. On July 14, 1999, DIP
satisfied the short sale obligation (as well as similar short
sale obligations assumed from DIP’s other partners) by purchasing
U.S. Treasury notes with a face value of $29,500,000 for
$29,402,053.78 plus accrued interest of $186,188.52 and
delivering the U.S. Treasury notes in satisfaction of the short
sales.
On August 12, 1999, petitioner transferred to DIP 1,500
shares of publicly traded stock in Integral Vision, Inc. (INVI).
On August 23, 1999, DIP sold 4,500 of the 7,500 shares of INVI
stock contributed by the partners (in addition to 1,500 shares
contributed by petitioner, the other two partners of DIP had
contributed a total of 6,000 shares) and claimed a short-term
7(...continued)
limited liability company. Because that company is disregarded
as an entity for Federal income tax purposes, see sec.
301.7701-2(c)(2), Proced. & Admin. Regs.; see also Kligfeld
Holdings v. Commissioner, supra at 195 n.7, we refer to the sale
as if it were entered into directly by petitioner.
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