- 11 -
Discussion
I. Internal Revenue Code Provisions and Regulations
A. Code Provisions
1. Nonrecognition of Gain Issue4
4 In his objection to the motion, respondent states:
“Petitioner’s request that the Court determine that no income or
gain should be recognized by * * * Mr. Curtis and Mr. Winn is
inappropriate * * * [because] the Court does not have
jurisdiction over the resulting net tax effect on the partners”,
citing secs. 6226(f) and 6231(a)(3), which, in effect, limit our
jurisdiction in a partnership proceeding to the determination of
partnership items as defined in regulations. In his response,
participating partner argues that, under the applicable
partnership regulations, the amount and character of the
liquidating distribution and Mr. Winn’s and Mr. Curtis’s bases
for their partnership interests in Countryside are partnership
items. He concludes that, because we may make determinations
with respect to the amount and character of the liquidating
distribution and Mr. Winn’s and Mr. Curtis’s bases in
Countryside, it necessarily follows that we may determine whether
the liquidating distribution resulted in gain recognized to them.
Participating partner also points out that respondent’s
jurisdictional argument is somewhat disingenuous in the light of
the fact that the “Explanation of Items” included in the FPAA
increases 2000 capital gain to Mr. Winn and Mr. Curtis by
$12,055,192. Also, we have examined Exhibit A attached to that
explanation, which makes clear that respondent views the
liquidating distribution as a distribution of $12,055,192 to Mr.
Winn and Mr. Curtis, and he views each as having a zero basis in
Countryside, thereby attributing that amount of alleged gain to
them.
We agree with participating partner on this question of
jurisdiction. Although sec. 301.6231(a)(5)-1T(b), Temporary
Proced. & Admin. Regs., 52 Fed. Reg. 6790 (Mar. 5, 1987),
ambiguously provides that “[a] partner’s basis in his interest in
the partnership is an affected item to the extent it is not a
partnership item”, in this case, where Mr. Winn’s and Mr.
Curtis’s bases in Countryside are entirely determined by
partnership items, i.e., contributions to the partnership and
partnership-level operating losses, distributions, and
liabilities (see apps. B and C to this report and sec.
301.6231(a)(3)-1(a)(1)(i) and (v), (4)(i) and (ii), Proced. &
Admin. Regs.), it is appropriate to determine those bases in a
partnership proceeding. Moreover, as discussed infra, the
determinative issue in deciding whether Mr. Winn and Mr. Curtis
(continued...)
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: March 27, 2008