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[t]he claimed tax treatment should * * * be adjusted or
modified.
Section 1.701-2(c), Income Tax Regs., applies a facts and
circumstances test in order to determine whether “a partnership
was formed or availed of with a principal purpose to reduce
substantially the present value of the partners’ aggregate
federal tax liability in a manner inconsistent with the intent of
subchapter K”, and section 1.701-2(d), Income Tax Regs., contains
11 examples intended to “illustrate the principles of paragraphs
(a), (b), and (c)”.
2. The Section 731 Antiabuse Regulation
Section 1.731-2(h), Income Tax Regs., provides in pertinent
part:
[I]f a principal purpose of a transaction is to achieve a
tax result that is inconsistent with the purpose of section
731(c) and this section, the Commissioner can recast the
transaction for Federal tax purposes as appropriate to
achieve tax results that are consistent with the purpose of
section 731(c) and this section. * * *
The regulation invokes a facts and circumstances test and
provides three examples. Id. Two find deemed distributions of a
partnership’s marketable securities to partners, and the third
permits a series of distributions of “multiple properties” to be
treated as “part of a single distribution”.
II. Arguments of the Parties
A. Participating Partner
Attached to the motion are exhibits containing computations
for Mr. Winn and Mr. Curtis that, for each, show (1) his share of
Countryside’s liabilities and his adjusted basis in his
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Last modified: March 27, 2008