- 26 -
At the hearing, respondent’s counsel conceded that the
amounts and computations set forth on the exhibits attached to
the motion (appendixes B and C) are arithmetically correct, but
respondent disputes participating partner’s computational results
on the basis of respondent’s disregard, for Federal income tax
purposes, of the CB&T loans, Mr. Winn’s transfer of a 5-percent
interest in Countryside to Mr. Curtis, and the formation and
separate existence of CLPP and MP. Respondent views those
transactions, culminating with the liquidating distribution, as
“designed to circumvent the provisions of Subchapter K and [as],
in substance, * * * equivalent to a distribution of cash to Winn
and Curtis.” He further alleges that “[t]he entire series of
transactions is a sham and should be disregarded for federal
income tax purposes * * * [and] recast * * * in accordance with
its substance”, which, in respondent’s view, is a distribution of
cash or a cash equivalent to Mr. Winn and Mr. Curtis.14
14 In the FPAA, the only transaction alleged to constitute
a “sham”, lacking in “economic substance”, is the formation and
distribution of CLPP and MP, an allegation that participating
partner concedes for purposes of the motion. In the amended
answer, however, respondent treats as “sham”, and disregards for
lack of “business purpose” and “economic effect”, not only the
distribution to Mr. Winn and Mr. Curtis of CLPP and MP, but also
the CB&T loans to Countryside and MP and the latter’s purchase of
the AIG notes, with the result that that “series of transactions”
is to be treated as “equivalent to a distribution of cash to Winn
and Curtis.” Respondent does not, in the amended answer,
identify the source of the roughly $8.5 million distribution of
money (“Cash/Securities”) that he considers Countryside to have
distributed to Mr. Winn and Mr. Curtis ($6,345,394 to Mr. Winn
and $2,274,191 to Mr. Curtis). At the hearing, however,
respondent’s counsel acknowledged that the source of that money
is the $8.55 million Countryside borrowed from CB&T. She would
not, however, acknowledge the reality for tax purposes of the
(continued...)
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Last modified: March 27, 2008