- 28 -
purposes. The latter inquiry is relevant solely to the basis
issues15 because, as noted supra, participating partner concedes
that both CLPP and MP may be disregarded for purposes of the
motion; i.e., for purposes of the nonrecognition of gain issue.16
Lastly, respondent asserts that, because issues of (1)
economic substance and (2) tax avoidance motives on the part of
the partners in Countryside in structuring the liquidating
distribution are relevant to our decision on the motion, summary
judgment is precluded until we have resolved respondent’s motion
15 For example, if both CLPP and MP are disregarded, Mr.
Winn and Mr. Curtis are deemed to have received the AIG notes
directly as distributions in liquidation of their interests in
Countryside, and, assuming those notes are not treated as money
under sec. 731(c)(1)(A), each’s resulting basis in his notes is
determined from his partnership basis reduced by the amount of
his relief from Countryside’s liabilities on the distribution
date. See secs. 732(b) and 752(b). Stated numerically,
according to his computations, Mr. Winn’s basis for his share of
the AIG notes would be $280,828 ($19,937,590 - $19,656,762) and
Mr. Curtis’s basis for his share of those notes would be $287,705
($7,760,895 - $7,473,190). See apps. B and C. Alternatively, if
only CLPP is disregarded, then MP’s failure to make a sec. 754
election negates any basis step-up to Countryside for the
Manchester property. See sec. 734(b) (last sentence).
16 Respondent asks that, in this case, we address the
validity for Federal income tax purposes of CLPP and MP because,
assuming we decide that Mr. Curtis and Mr. Winn are not required
to recognize gain in 2000, thereby forcing respondent to attempt
to attribute taxable gain to them upon the redemption of the AIG
notes in 2003, his success in that effort may depend upon whether
Mr. Winn and Mr. Curtis are deemed, for Federal income tax
purposes, to have received (1) membership interests in CLPP or MP
or (2) the AIG notes themselves in 2000. Respondent fears that,
if he first raises the L.L.C. validity issue in litigation
limited to the 2003 taxable year, he may be whipsawed by a claim
that 2000 was the proper year for which to raise that issue. In
the light of participating partner’s concession, there is no need
to address the L.L.C. validity issue in deciding the motion, and
we will be able to address respondent’s fear of being whipsawed
when we resolve any remaining issues in this case.
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Last modified: March 27, 2008