Countryside Limited Partnership, CLP Holdings, Inc., Tax Matters Partner - Page 2




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               without economic substance and there was, in substance,                
               a cash distribution of over $11 million from CS to W                   
               and C or, alternatively, a distribution of “marketable                 
               securities”, as defined in sec. 731(c)(2), I.R.C., that                
               constituted money for purposes of sec. 731(a)(1),                      
               I.R.C., and (2) CS is not entitled to step up its basis                
               in R.                                                                  
                    W (a participating partner) moves for partial                     
               summary judgment on the issue of whether he and C are                  
               required to recognize gain on the year 1 distribution                  
               to them (i.e., whether they are deemed to have received                
               money), and he concedes, for purposes of the motion,                   
               that CLPP and MP may be disregarded, which results in a                
               deemed distribution of the notes from CS to W and C.                   
                    The issue for decision is whether the deemed                      
               distribution of the notes from CS to W and C                           
               constituted, in substance, a distribution of cash or,                  
               alternatively, of “marketable securities”.                             
                    1.  Held:  Because the deemed distribution of the                 
               notes to W and C (1) accomplished a legitimate business                
               purpose (to enable W and C to convert their shares of                  
               CS’s equity in property R into interest-bearing                        
               promissory notes) and (2) resulted in a change in their                
               economic position, the transactions which enabled them                 
               to accomplish that result in a tax efficient manner may                
               not be disregarded for lack of economic substance.                     
                    2.  Held, further, respondent has failed to                       
               demonstrate that there is a genuine issue of material                  
               fact regarding the status of the notes as nonmarketable                
               securities.                                                            
                    3.  Held, further, CS’s deemed distribution of the                
               notes to W and C resulted in nonrecognition of gain to                 
               them under secs. 731(a)(1) and 752, I.R.C.                             


               Richard A. Levine and Elliot Pisem, for petitioner and                 
          participating partner.                                                      
               Jill A. Frisch, Barry J. Laterman, and Elizabeth P. Flores,            
          for respondent.                                                             








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