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distribute in lieu of marketable securities, or cash, to avoid
section 731(c).”
We interpret respondent’s statement as expressing tacit
agreement with participating partner that if, in fact, the AIG
notes were not marketable securities, as defined in section
731(c)(2), then section 1.731-2(h), Income Tax Regs., is
inapplicable to Countryside’s deemed distribution of the AIG
notes to Mr. Winn and Mr. Curtis. Because we have concluded that
the AIG notes did not constitute marketable securities, we assume
that respondent would concede that section 1.731-2(h), Income Tax
Regs., is inapplicable to the distribution of those notes.
In any event, we agree with participating partner that each
of the three examples contained in section 1.731-2(h), Income Tax
Regs., the first of which involves a change in partnership
allocations or distribution rights with respect to marketable
securities, the second, a distribution of substantially all of
the partnership assets other than marketable securities, and the
third, a distribution of multiple properties to one or more
partners at different times, involves circumstances that are not
present in this case. We also note that, in the preamble to the
final regulations under section 731(c), the Commissioner, in
response to a taxpayer request that there be “examples
illustrating abusive transactions intended to be covered by * * *
§ 1.731-2(h)”, stated that “the text of the regulations
adequately describes several situations that would be considered
abusive * * *, and * * * additional examples are unnecessary.”
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Last modified: March 27, 2008