Kligfeld Holdings, Kligfeld Corporation, Tax Matters Partner - Page 12

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          the Kligfelds for their 2000 taxable year.  Both notices were a             
          result of the Commissioner’s determination that Kligfeld should             
          have taken the short sale obligation into consideration when                
          determining outside basis in Holdings 1.  Accordingly, Kligfeld             
          (and Corporation after him) should have had a much lower outside            
          basis, with the following results:  Holdings 2 shouldn’t have               
          been able to adjust the Inktomi stock’s inside basis under                  
          section 754; the later distribution of cash to Corporation                  
          exceeded Corporation’s much-reduced outside basis and should have           
          been treated, at least in part, as a capital gain; and, finally,            
          the stock distributed to Corporation should have had a basis of             
          zero since Corporation no longer had any outside basis once the             
          cash was distributed.  As a result, the deficiency notice to the            
          Kligfelds showed an increase in capital gain of more than $9.8              
               Holdings 2 timely filed a petition with this Court to review           
          the FPAA, and the Kligfelds timely filed a petition challenging             
          the notice of deficiency.  Kligfeld, as a representative of                 
          Corporation and on behalf of Holdings 2, moved for summary                  
          judgment in the partnership case.  He argues that the                       
          Commissioner acted too slowly:  the FPAA for the 1999 taxable               
          year was issued more than three years after Holdings 2 filed its            
          1999 return.  The Commissioner argues in reply that because the             

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Last modified: November 10, 2007