Countryside Limited Partnership, CLP Holdings, Inc., Tax Matters Partner - Page 26




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               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