Kligfeld Holdings, Kligfeld Corporation, Tax Matters Partner - Page 4

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          as to provide for large--but not out-of-pocket--losses on their             
          individual tax returns.  Enormous losses are attractive to a                
          select group of taxpayers--those with enormous gains.                       
               Marnin Kligfeld was one such taxpayer.  In 1999, he owned              
          more than 80,000 shares of Inktomi Corporation, a software                  
          developer for Internet service providers.  Inktomi’s main                   
          product, a search engine, succeeded in displacing AltaVista.                
          Eventually, Google displaced Inktomi, and Yahoo! bought what was            
          left of the business in 2003;4 but in 1999, at the height of the            
          tech boom, Kligfeld’s Inktomi stock was worth more than $10                 
          million.  Kligfeld had a basis in the stock of just over                    
          $300,000, so if he had simply sold it, he would have incurred a             
          significant capital gain which would have likely resulted in a              
          very large capital gains tax.                                               
               But Kligfeld did not simply sell the stock.  Instead, he               
          began a series of transactions that he asserts eliminated, or at            
          least reduced, any capital gains built into the Inktomi stock:              
               •    On September 20, 1999, Kligfeld--in conjunction                   
                    with his wholly owned “S corporation” Kligfeld                    
                    Corporation (Corporation)--formed Kligfeld                        
                    Holdings (Holdings 1) as a California partnership.                
                    Kligfeld contributed approximately 83,600 shares                  
                    of Inktomi stock.5                                                

               4 See Inktomi Corp., Definitive Proxy Statement (Form                  
          DEFM14A) (Feb. 11, 2003).                                                   
               5 It is unclear from the record at this stage of the                   
          proceedings what Corporation contributed to the partnership or              

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