- 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 NextLast modified: March 27, 2008