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95 T.C. 1 (1990). What the FPAA did do was determine a tentative
outside basis of each DIP partner and then transfer that
tentative outside basis to the distributed stock under section
732(b). While the tentative basis in the distributed property
was zero, and DIP’s partners were required by section 732(b) to
take bases in the distributed stock equal to their outside bases
in DIP, petitioner’s outside basis in DIP did not necessarily
equal DIP’s inside basis in its assets. (Nor was petitioner’s
outside basis otherwise required under subtitle A to be taken
into account for DIP’s 1999 taxable year.) According to the
FPAA, petitioner’s outside basis in DIP was zero, which made the
basis of the distributed INVI stock zero and, subject to any
partner-level factual determinations, potentially eliminated
13(...continued)
required to take into account in computing their outside bases in
DIP. The FPAA, for example, determined that the short sale
obligation was a liability under sec. 752. Respondent also
determined in the FPAA that DIP’s partners received constructive
distributions of cash that reduced their outside bases in DIP
under sec. 733(1) when their shares of the short sale liability
was reduced. See also secs. 705(a)(2), 752(b). Both partnership
liabilities and partnership distributions are partnership items
within the meaning of sec. 6231(a)(3). See sec.
301.6231(a)(3)-1(a)(1)(v), (4), Proced. & Admin. Regs. While the
factual and legal determinations made at the partnership level
are conclusive in determining components of outside basis, the
ultimate determination of outside basis is made only in a
subsequent partner-level affected items proceeding such as we
have here. See Gustin v. Commissioner, T.C. Memo. 2002-64; cf.
Univ. Heights v. Commissioner, 97 T.C. 278 (1991).
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Last modified: November 10, 2007