T.C. Memo. 2008-3
UNITED STATES TAX COURT
COUNTRYSIDE LIMITED PARTNERSHIP, CLP HOLDINGS, INC.,
TAX MATTERS PARTNER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3162-05. Filed January 2, 2008.
CS, a limited partnership, owned real property R,
which CS sold in April of year 2. W and C were members
of CS. In late year 1, CS redeemed W’s and C’s
interests in CS by distributing to them its 99-percent
interest in a (newly formed) L.L.C., CLPP, which held a
99-percent interest in a second (newly formed) L.L.C.,
MP. MP owned four privately issued promissory notes in
the aggregate principal amount of $11.9 million
purchased with (1) an $8.55 million bank loan to CS,
the proceeds of which were contributed by it to CLPP,
which then contributed $8.5 million to MP, and (2) a
$3.4 million bank loan directly to MP. The notes were
neither listed nor traded on an established financial
market. On the distribution to W and C, each was
relieved of his share of CS’s liabilities, although
each retained, indirectly, his share of MP’s
liabilities. W and C reported no recognized gain on
account of the distribution. CS elected to step up its
basis in R.
Respondent alleges: (1) CLPP, MP, and all of the
late year 1 transactions should be disregarded as
Page: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: March 27, 2008