- 22 -
of the liquidating distribution, that regulation has no bearing
on the motion, which is addressed solely to the nonrecognition of
gain issue. Participating partner further argues that no matter
how respondent recasts the liquidating distribution pursuant to
section 1.701-2, Income Tax Regs. (i.e., as distributions of
interests in CLPP, MP, or of the AIG notes themselves),
respondent has not demonstrated an ability to overcome the facts
established by participating partner, which demonstrate that (1)
Mr. Winn and Mr. Curtis received nonmarketable securities, and
(2) the net decrease in their respective shares of Countryside’s
and MP’s liabilities did not exceed their respective bases in
Countryside. Participating partner also dismisses section 1.731-
2(h), Income Tax Regs., as inapplicable on the ground that it is
applicable only to circumstances “involving changes in
partnership allocations with respect to marketable securities and
distributions of nonmarketable securities by a partnership that
also owns marketable securities,” which, in substance, constitute
a manipulation by a partner of “the inherent flexibility of the
partnership form to acquire an increased interest in marketable
securities from a partnership without effecting a transaction in
the form of a distribution [of marketable securities].”
Participating partner reasons that “the provision should not have
any application to a partnership [Countryside] that owns no
marketable securities at all, either directly or indirectly.”
Participating partner also argues that the cases respondent
cites involving the disallowance of deductions arising out of
Page: Previous 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Next
Last modified: March 27, 2008