- 49 -
Nor do we agree with respondent that there is a need for
additional discovery of Mr. Winn, Mr. Curtis, their associates,
and others “regarding the purpose and effect” of the transactions
at issue and the reason for Mr. Winn’s transfer of a 5-percent
interest in Countryside to Mr. Curtis. There is no dispute that
the purpose of the transactions at issue was to enable Mr. Winn
and Mr. Curtis to exchange their limited partnership interests in
Countryside for the AIG notes, and the means selected to
accomplish that goal were concededly tax motivated. Moreover,
Mr. Winn’s transfer of a 5-percent interest in Countryside to Mr.
Curtis has no bearing on the tax results to Mr. Winn and Mr.
Curtis on the exchange of their interests in Countryside for the
AIG notes because, as participating partner points out, even if
that transfer had not taken place, their tax bases in Countryside
still would have exceeded their net liability relief under
section 752(a) and (b), resulting in no gain to either under
section 731(a)(1).
In short, respondent, in finding a lack of economic
substance, has erroneously focused on the tax-motivated means
instead of the business-oriented end. The transaction requiring
economic substance is Countryside’s redemption of Mr. Winn’s and
Mr. Curtis’s partnership interests therein. That the redemption
of a partnership interest in exchange for bona fide promissory
notes issued by an independent third party can serve a legitimate
business purpose is beyond cavil. The question is whether such a
redemption may be respected for tax purposes if the means
Page: Previous 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 Next
Last modified: March 27, 2008