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Furermore, in enactig Subchapter K in 1954, Congress stated as its motivation its desire
to eliate confsion and provide certainty with respect to the tax treatment of parerships and
. parers. "The presence of a tax avoidance motive, however, is of no consequence if the realty of
the transfer of
interest and the good faith ofthe pares are satisfactorily established." Mim.6767,
1952-1 CB 111. H.R. Rep. No. 1337, 83d Congress, 2d Session 65 (1954); S. Rep. No. 1622, 83d
Congress, 2d Session 89 (1954).
There are numerous areas where Subchapter K deliberately requies tax results that are
inconsistent with substance or economic reality. The general rule of Subchapter K creates clear distortons by not mandatig equality between "inide" and "outside" basis, precisely the situation
in the instant case. Also, the character and holdig period of parership
assets is determned at the
must be allocated among the parers even
parership leveL. Furer, recognzed parership income
though it is unclear which parers, if any, will benefit from such income, and even though if the
parership were treated as an aggregate entity no parer would report any income. Additionally,
parership "terminations" under Code section 708(b)(1)(B) can have signcant beneficial tax
effects or signficant adverse tax effects on parers whose economic position with respect to the
parership's assets and business is not changed. These rues, and
numerous similar rules, reflect
the fact that Subchapter K was codified priarly to provide cerainty, not to achieve the goal of
economic harony. Thus, the resultant step-up in basis is more liely than not consistent with the
intent
of subchapter K. 75,
75 It should be noted tht, durg the comment period on the proposed reguations, the New York State Bar
Asociation made a recommendation to the Treasur that a short sale examle that contaied facts simlar to the
traction at isue be included in the Reguation. The recommendation from the New York State Bar Asociation wa
that the examle ilustrted a traction tht
would violate the proposed anti-abuse regulations. However, the Treasur
did not adopt the recommendation and did not include the examle in the Reguation. '
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2. Validity of
the Regulation.
Congress' strong statement that parerships, if
As discussed below, in light of
they are real,
are to be respected regardless of
the motive for their formation and use, and Congress's desire to
the taxation of parerships and parers, the scope of
provide certaity
in the area of
the Regulation
and its associated remedies are grossly overbroad. Hence, to the extent the Regulation were applied
as broadly as its words permt, it would be invalid. If the Regulation were interpreted to overrde
the Clearly expressed intent of Congress as reflected in the provisions of Subchapter K, it would be
invalid. See, e.g., Wasserman & Cuff
"IR Attempts To 'Demonize' the Parership: The Final
Section 701 Regulations--Antiabuse Reguations or Simply Abusive Reguations?" Portland Tax
Foru, 1995; Gouwar, "The Proposed Parership Anti-Abuse Reguation: Treasur Oversteps its
Authority," 11 Joural of
Parership Taxation 287 (Winter 1995); McKee, Nelson & Whtmre,
Parerships and Parers,
"Special Report - Subchapter K Anti-Abuse Rule," Federal Taxation of
2d Edition (Waren, Gorham & Laont, 1994); Dell, "The Proposed Parership Anti-Abuse
Regulation: Let's Get Real (and Practical), Shall We?!" 21 Joural of
Real Estate Taxation 99;
Lipton, "IRS Improves Parérship Anti-Abuse Regs., but Major Problems Remai" 82 Joural of
Taxation 132 (Marh 1995); Banoff, "AnatomyofanAntiAbuseRule: WhatsReallyWrongWith
Reg. Section 1.701-2" Tax Notes, March 20, 1995, p. 1859; Chevron. U.S.A.. Inc. v. Natual
Resources Defense CounciL. Inc.. 467 U.S. 837 (1984); and Commssioner v. South Texas Lumber
Co.. 333 U.S. 496 (1948). Moreover, regulations issued under Code section 7805 generally have
been treated as interretive, and not legislative. See United States v. Vogel Fertlizer Co.. 455 U.s.
16 (1982); Rowan Coso v. United States. 452 U.S. 247 (1981); Dresser Industres. inc. v.
Commissioner. 911 F.2d 1128 (5th Cir. 1990); Gehl Co. v. Commssioner. 795 F.2d 1327 (7th Cir.
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1986); CWTFars.Inc. v. Commssioner. 755F.2d 790
(11thCir.
1985),
cert.
denied,
477
U.s. 902
(1982).
The thst of the legal commenta: is that the Regulation is unworkable because it does not
include a clear and reasonable standad that can be used by taxpayers and the IR to identi
prohibited tranactions, nor are the examples of parership arangements sufcient to provide a
standard or an analytcal approach which can be reasonably utilized to identify permssible or
imperssible transactions. Inasuch as the Reguation itself and the Examples it contas provide
litte or no gudance as to the difference between tranactions which are prohibited and those which
are not, it may be void for vagueness. The apparent implied standard for application by the IRS of
the Regulation consists of "I know it when I see it" (Jacob
ells v. Ohio. 378 U.S. 184,197 (1964)).
Ths tye of ambiguous ex post facto standard for application of the Regulation permts and
encourages arbitr and discratory enforcement, which is one of the specific evils addressed
by cour in invalidatig laws for vagueness. See, e.g., Papachrstou v. City of Jacksonville. 405
U.S. 156 (1972). See also Vilage of
Hoffman Estates v. Flipside. Hoffan Estates. Inc., 455 U.S.
489 (1982), in which the cour found that a commercial ordiance may be void for vagueness; and
Diebold. Inc. v.' MarshalL. 585 F.2d 1327 (6th Cir. 1978), where an economic regulation was held
void for vagueness.
Additionally, the Regulation should be viewed as a signficant reguatory action under
Executive Order (EO) 12866. The "Special Analyses" section of
the preamble states that "It has
been determed that ths Treasur decision is not a signficant reguatory action as defined in EO
12866." Additionally, in a "Speciai Analyses and the Secreta's Authority section of the
preamble,
the lRS and Treasur acknowledge and discount adverse commentar and criticisms of this
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determation and conclude, without analysis, that they..... believe that the reguation complies with
all statutory and regulatory requirements related to the issuace of
the notice of proposed ruemakg
and that it is clearly withn the Secretar's authority to issue the fial regulation." However, for
reasons hereinafter discussed, we believe that the issuace of the Regulation does constitute a
signficant regulatory action.
Section 3(f) of
EO 12866 defies a "signficant reguatory action" to include any regulatory
to result in a rule that "may: (1) (h)ave an anual effect
action that
is liely
on the economyof$100
the economy, (or)
million or more or adversely affect in a material way the economy, a sector of
productivity ..." (emphasis added). The term "signficant regulatory action" alo includes any
regulatory action that is likely to result in a rule that "may: (4) raise novel
legal or policy issues"
inc1udes the issuance offial
(emphasis added). EO 12866 §3(f)(4). ''Reguatory
action"
regulations
by Treasur decision.
There may be a signficant effect on the economy from the prohibition of allegedly abusive
parership transactions targeted by the Reguation. Anyone of these targeted tractions could
involve $100 millon or more. The impact on Brown Group transactions alone meets ths
requirement. (Such tranactions derive their name from the case of Brown Group. Inc. v.
Commssioner. 102 T.C. 616 (1994), withdrwn and reversed upon reconsideration, 104 T.C. No.
5 (1995), involvig the attempted use of a parership stctue to avoid realzation of
"subpar F
income.") According to IR officials in their motion for reconsidertion, the original decision by
the Tax Cour in Brown Group, which is a stated target of the Reguation, would reduce tax
collections by $4 bilion. (See also, "Tax Cour's Decision in Brown Group May Have Major
Ramfications," 63 Tax Notes 512, May 2, 1994; "Subpar F: U.S. Tax Cour's Brown Group
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Decision Rej ects Aggregate Theory. of
Parership Taxation; Threatens Operation of Subpar F," 8
Tax Notes Intl1175, May 2, 1994.)
Furter, the Reguation could well deter many non-abusive and legitimate economic
tranactions and thereby have an effect on the U.S. economy that may easily be greater than $100
millon anually. If
the Regulation affects just ten transactions per year, and each of
the tranactions
has an impact on the economy of $10 millon, there would obviously be an anual impact on the
economy of $100 millon. In such case, the Treasur decision may be a "signficant reguatory
action" under §3(f)(1) of EO 12866. The likely effect of
the Reguation on its intended targets, when
combined with the effect on untended targets, is likely well in excess of the minium limits
requied to make EO 12866 apply.
Moreover, EO 12866 can apply even if
the impact on the economy as a whole does not reac:n
an anual level of $100 millon if the Reguation may "adversely effect in a material way the
economy, a sector of
the economy (or) productivity." For example, the real estate industr, a sector
of the economy that is only recently. reviving from recession, may be adversely affected by the
Reguation, as may the equipment leasing industr, the oil and gas industr, hedge fuds, and
stctued finance tractions.
Moreover, by creatig an "abuse of entity" stadard that prohibits the use of parerships "in
circumvention of the intent of ..." other prov.sions of the Code, the Regulation raises novel
legal and
policy issues, so as to constitute a "signficant regulatory action" under EO 12866 §3(f)(4). The
controversy suounding the issuance of
the Reguation is unprecedented. The Regulation describes
ignore the litera language or requirements of
circumstances under
which theIRS may
the Code, and
ths ability alone obviously "may... raise novel legal or policy issues."
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Thus, the Treasur may have ered in determnig that the Regulation is not a "signficant
regulatory action" under the EO 12866, and if so, at a minium, a regulatory assessment appears to
be required.
Furer, the Reguation is fuer subject to attack because it grts to the Commssioner of
Interal Revenue the discretionar power on a case-by-case basis to alter the substantive law and its
application to the facts, and thereby
usurs Congressional legislative authority and strps the cours
of de novo adjudication
authority when there is no basis in the law for ths grant of power to the
Commssioner in the maner asserted by the Regulation.
Subchapter K (sections 701 though 761) of chapter 1 of the Code addresses the federal
income taxation of parers and parerships. Under the Regulation, the Commissioner, who is a
the Treasur, is given cerai discretionar powers that can be exercised
delegate of
the Secretar of
on a case-by-case basis with respect to transactions involvig parerships. Specifically, under
certain standards which may not be ascerainable, the Commssioner, under pargraph (b) of the
Regulation, can recast a transaction "as appropriate to achieve tax results that are consistent with the.
intent of subchapter K" and "can deterne, based on the parcular facts and circumstances, that to
achieve tax results that are consistent with the intent of subchapter K," the parcular maner in
which the claied tax treatment should be "adjusted or modied." Paragraph (d) sets fort varous ,
examples of when the Conìssioner may exercise his powers to recas a trsaction as somethg
other than'what it purorts to be. However, in none of
those examples which conclude that the
Commssioner may recast the transaction (Examples 6, 9, 10 and 13) is there any statement of what
the recast trsaction shal be or indeed whether the transaction shall be recast at alL. Intead, the
matter is left to the discretion of the Commssioner. Under paragraph ( e) of the Regulation, subject
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to standards that may
not be ascertaiable, the Commssioner "can treat a parership as an aggregate
of its parer in whole or in par as appropriate to car out the puroses of any provision of the
hiteral Revenue Code or the reguations promulgated thereunder."
The Treasur Deparent, which is the adstrative agency charged by Code section 780 1
with the administration and enforcement of the internal revenue laws, has by the issuance of ths
Reguation asserted an expansion of its powers beyond the powers it had before. Prior to ths
Reguation, the Secretar's delegate, i.e., the Commissioner, with respect to the matters addressed
by
the Regulation, ha the power as a litigant (as does the taxpayer) to argue toa cour his own views
as to the proper interretation of the tax laws and their application to the facts of a parcular case.
Under the Regulation, with respect to the matters addressed therein, the Commssioner has the
discretionar power under certai stadards (which may
not be ascertaiable) to alter the substantive
law and its application to the facts and to do so on a case-by-case basis. The Commssioner's
determation thus becomes par of the law itself and is no longer merely the position of a litigant.
The power of a cour to make a de novo interpretation of the law and a de novo application of it to
the facts of a parcular case, has been, to the extent the Commissioner's power is exercised, reduced
to a review of
whether the Commssioner has abused his discretion. Ths would be starkly apparent
in tax-refud cases, where the Commssioner is not even a par to the case, the Justice Deparent
representing the governent in such cases. Furermore, the Regulation sets up no procedures which
must be followed or fidings which mus be made which would form an adminstrative record which
would provide a basis to enable a cour adequately to perform a fuction of judicial review of the
exercise of power by an admstrative agency.
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Thus, the Reguation has granted to the Commssioner both a new legislative power and a
new judicial power. The new legislative, power is the power to alter the express provisions of
subchapter K and other provisions of
the Code so as to conform them to the same perceived intent
of subchapter K. The new judicial power is the power to make these alterations and deterations
on a case-by-case basis.
The powers of an admstrative agency charged by Congress with the enforcement and
adstration of a body of law are only those powers expressly or impliedly granted to the
admstrative agency by Congress. An admnistrative agency canot by regulation expand its
powers uness such expanion of powers by regulation is expressly or impliedly authorized by
Congress. The issue, then, is whether the Treasur Deparent has the authority to issue ths
Reguation, which grants to the Commssioner these new legislative and
judicial powers.
Ths matter, therefore, touches upon fudaental issues relatig to the natue of our
governent; specifically, the separation-of-powers doctre, which distrbutes legislative, executive,
and
judicial powers among the three branches of governent. Notwithstandig ths doctrne, it has
been held permssible under cert circumstances for Congress (being the legislative branch) to
grant to an administrtive agency (being, in the executive brach) cerain legislative and judicial
powers. Without examg the scope of Congress' power to make such grants, the fact is that, with
respect to the Regulation, it has not done so in the present case. That is, Congress has simply not
expressly or impliedly authorized the Treasur Deparent to create for itself
the power to alter the
substantive law relatig to the taxation of parerships or, most certaiy, to do so on a case-by-case
basis. Treasur Decision 8588, which promulgated the Reguation, stated thai the authority for the
Regulation was Code section 7805 and also Code sections 701 though 761. Code section 7805 is
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the general provision authonzing the Treasur Deparent to issue "needful rules and reguations"
forthe enforcement of
the internal revenue laws. Code section 7805 has been held to authorize only
interpretative reguations. See, e.g., United States v. Vogel Fertlizer Co., supra; Rowan Coso v.
United States, supra; Dresser Industres. Inc. v. Commssioner, supra; Gehl Co. v. Commissioner,
supra; CWT Fars. Inc. v. Commssioner, supra. The power to modify or alter on a case-by-case
basis is not the power to interret. With respect to Code sections 701 though 761, relating to the
taxation of parers and parerships, there is simply nothg in those sections from which can be
inerred the power to issue a regulation grantig new legislative and judicial powers to the
Commssioner in the maner assered by the present Regulation.
For an interretative reguation to be valid, it must implement in a reasonable maner a
Congressional mandate set fort in the Code. See, e.g., U.S. v. Carght. 411 U.S. 546, 550
(1973); U.S. v. Correll. 389 U.S. 299, 307 (1967). An interpretative regulation implements the
Congressional mandate in a reasonable maner ifit hanonies the statute's origi and purose with
the statutory language. See, e.g., U.S. v. Vogel Fertlizer Co., supra; National Muffer Dealers
Ass'n. v. U.S., 440 U.S. 472, 477 (1979).
To be valid under the foregoing test, an interpretative reguation must satisfy the following
requiements:
(a) The reguation canot usur Congressional authority by adding restrctions that are
not contaied in the statute. See, e.g., Hughes Intl. Sales Corp. v. Commssioner,
100 T.C. 293, 304 (1993);
(b) The reguation canot be inconsistent with statutory language. See, e.g., The An
Jackson Famlv Foundation v. Commissioner, 15 F.3d 917 (9t Cir.1994);
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(c) il the absence of statutory ambiguty, the regulation must comport with the plai
language of
the statute it purorts to interpret. See, e.g., Nalle il v. Commissioner,
997 F.2d 1134 (5th Cir. 1993);
(d) The reguation canot broaden the scope of coverage of the statute beyond its
unambiguous terms. See, e.g., Rowan Coso v. U.S.. supra; and
( e) The reguation canot be used by the Secretar or his delegate to rewrte legislative enactments that give effect to ideas of policy and fitness or the desirbility of symetr in statutes, especially where an unclear regulatory interpretation of an
othere clear statutory
provision is the means used to accomplish these ends. See, e.g., Busse v. Commssioner, 479 F.ld 1147, 1151 (7th Cir. 1973).
Based upon the foregoing requiements for a valid interpretative reguation, a compellg
argument can be made that the Regulation more likely than not exceeds Treasur's rulemakg
authority. First, the Regulation does not reflect the language or the intent of Code section 701 under
which it is promulgated and which it purorts to interpret or Code sections 701 though 761. Code
section 701 provides that: "A parership as such shall not be subject to the income tax imposed by
ths chapter. Persons carg on business as parers shall be liable for income tax only in their
separate or individual capacities." The Regulation does not interpret ths provision.
Second, there is no other authority under subchapter K for issuance of
the Regulation. The
Reguation states that a tranaction may be abusive if the transaction, although ~omplyig with the
literal
language of the Code, violates the "puroses" of subchaprer K or is in circumvention of the
intention of other provisions of the Code. Thus, the Regulation canot be an interpretative
regulation; instead of "interretig" the law, it allows the IR to ignore subchapter K and other
provisions of the Code. The Regulation, in effect, represents a legislative action by
the Treasur,
creating new tax law and
effectig its new anti-abuse policy without Congressional approval.
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Furer, Congress has previously considered and rejected broad anti-tax avoidance language
for the adminstration of
subchater K. The House verion of
the Tax Reform Bil of 1975 would
have requied, under Code section 704(b), that an allocation have a "business purose" and that "no
signficant avoidance or evasion of any tax imposed by the subtitle results from such allocation."
The Senate Finance Commttee expressly
rejected the "signficant avoidance or evasion of any tax"
concept presented in the House Bil because of its concern as to the uncertaity of application for
such a standard. See S. Rep. No. 938, Par I 49th Congo 2d Sess. 100 n.l1 (June 10, 1976). The
Finance Commttee replaced that standard with the present "substantial economic effect"test which
was adopted by the Conference Commttee and subsequently included in Code section 704(b) by
the
rej
Tax Reform Act of197 6. (Pb. L. 94-455). Accordingly, Congress has aleady
ected the standard
of "significant avoidance or evasion of any tax" in the adminstration of provisions which are
signficant to the opertion of subchapter K. Treasur canot now issue a purorted interretative
regulation that attempts to implement an even broader anti-abuse rue than Congrss has considered
and failed to adopt.
There are provisions of the Code which expressly give the Commssioner (as delegate of
the
Secretar) certai power to alter substantive law and its application to the facts on a case-by-case
basis. For example, Code section 482 authorizes the Commissioner to
'reallocate income among
related entitie.s. Code section 446(b) states that if a taxayer's method of accountig does not clearly
reflect income, "the computation of taxable income shall be made under such method as, in the
opinon of the Secretar, does clearly reflect income." Also, for example, Code section 385
authorizes the Secretar to prescribe reguations to determne whether an interest in a corporation
is to be treated as stock or as debt, and Code section 1502 authorizes the consolidated retu
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regulatio11, which in many ways alter the substantive tax law with respect to corporations filing
consolidated retus. There is simply
nothg, however, authorizing the Secretar to alter or modi
the provisions of subchapter K, much less to do so on a case-by-case basis.
Case-by-case basis adjudication authority
is not somethig foreign to adminstrative agencies.
The Regulation, however, is simply not in conformance with the present regulatory scheme set fort
by Congress for enorcement of
the internal revenue laws. For example, the Board of
Tax Appeals,
which adjudicated certai tax cases, was formerly
par of
the Bureau of
Internal Revenue, which was
par of
the Treasur Deparent. Today, the fuctions of
the Bureau of
Internal Revenue have been
taken over by the IR, which remais par of
the Treasur Deparent. However, the fuctions of
the Board of
Tax Appeals are today perormed by the United States Tax Cour, a Title I legislative
the Treasur Deparent. Thus, case-by-case adjudication of
cour, which is not par of
tax cases
is somethng that Congress addressed. Clearly, Congress could- not have envisioned that the
Commssioner could be granted such authority by a regulation promulgated without express statutory
authority therefor.
The purorted grant by the Reguation of these new legislative and judicial powers to the
Commssioner is starling. If
the Reguation's grant of authority to the Commissioner is vald under
no lit on the abilty of
present law, there is vialy
the Treasur Deparent to issue regulations
grantig to the Commissioner the power to alter substantive law with respect to a taxayer on a
case-by-case basis in pursuance of some perceived intent of some statutory provisions. The
Regulation, if valid, represents a viral elimination of restraints on the abilty of goverent
officials to expand their own powers over the people by met1S of their own declarations to that
effect. In other words, an interretation of
the Reguation that it is valid would create a vast shift in
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the presumptions to be made about Congressional silence as to alocations, retentions, and grants of
power in a regulatory scheme. Congressional silence as to whether a parcular power has been
grted to or intead witheld from an admstrative agency would be constred more easily and
more often in favor of
the grantig than the witholdig. Ths is not in accordance with the strctue
of our goverent laid down by the Founders. In the U.S. Declaration of Independence, for
example, it is said, as par of the list of the cres commtted by the Kig of
Great Britan, who acted
outside the restraits of representative governent: ''He hath created a multitude of new offces and
sent hither swars of offcers to harass our people and eat out their substance."
Accordigly, the Regulation appear to be a lawless expanion by
bureaucrats of
their own
powers over .the people and is in derogation of the people's rights to have independent judicial
determations of their controversies with their governent regardig the amounts of their propert
tht their governent may take or retai. In simlar cases where the Treasur or other executive
deparents have usured Congressional authority in the promulgation of a regulation, the cours
have held the regulation invalid. See, e.g., RLC Industres Co. v. Commissioner. 58 F. 3d 413 (9t
Cir.1995); The National Life and Accident Inurance Co. v. U.S.. 524F.2d559, 560 (6thCir.
1975).
Even assumg, arguendo, a predomiant tax avoidance motive, it is arguable that such a motive is
not inconsistent with the puroses of subchapter k inasmuch as that purose has been demonsated
and determed to be the achievement of certty, not the desire to reflect economic substace, and,
to the extent that a taxpayer has followed the literal provisions of the Code, those results which
obtai should be given tax effect. .
Additionally, the Regulation may be held to be invalid due to 1) vagueness, as it does not
arculate a clear and workable standard delineatigpennissible and proscribed transactions, and thus
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pennts and encourages arbitr and discrinatory enforcement; 2) faiure to comply with
Executive Order 12866 and perform the requied regulatory assessment; and 3) a lack of authority
for issuance of the Regulation and the unauthorized usuration oflegislative and judicial authority.
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M. NOTICE 2000-4
. In Notice 2000-44, the Servce provided two examples of tranactions purorted to "give
tapayers arificially high basis in parership interests and thereby give rise to deductible losses on
disposition of those parership interests." Notice 2000-44 is prima facie inapplicable to your
sitution, because the result of the transactions discussed herein was an increase in basis in the
Shares which did not give rise to a loss upon the sale of
the Shares. Even if
Notice 2000-44 were
applicable, it would not change our opinons herein.
.The Servce uses three cases76 and Treas. Reg. §1.165-1(b) to attempt to substantiate its
positions in Notice 2000-44. In each of
the cases, the purorted trsactions were not respected for
federal income tax puroses. However, all thee cases clearly higed on the economics suroundig
the sale of the assets which produced the purorted loss. In no case was the economic position of
the seller of the assets afer the sale signficantly affected by the sale. Treasur Regulation § 1.165-
1(b), states in par "(t)o be alowable as a deduction under §165(a), a loss must be evidenced by
closed and completed tranactions, fied by identifiable events. . . Only a bona fide loss is alowable.
Substce and not mere form shal govern in detering a deductible loss." By citig the Treasur
Reguation in Notice 2000-4, the Serce implies that the maner in which basis is determed
afects whether loss will be recogned under Code §165. Code §165 has
no such requiement.
Whe Code § 165 perts deductions for certain losses, the question of whether a disposition of
assets results in a gai or loss
is not deterned by reference to Code §165. Such'a determination
is made under Code §1001.
76 ACM Parership v. Commssioner. 157 F.3d 231,252 (3rd. Cir. 1998); Sculvv. United States. 840 F.2d
478,486 (7th Cir. 1988); Shoenberg v. Commssioner. 77 F.2d 446, 448'(8th Cir. 1935).
CHICAGO 151694 v 2, 47675.00001
JFW-1417
Case 1:05-cv-00748-CCM
Document 22-14
Filed 12/29/2006
Page 16 of 16
We believe a better
readig of
the legal authority discussed in Notice 2000-44 is to state only
the curent law: losses are deductible under Code § 165 only when realied upon a disposition of
propert which is respected for federal income tax puroses. Here, if
the Parership were to sell
the Shares for cash equal to a fai market value sale price close to the Parership's basis, such a sale.
would more likely than not be respected as a sale for federal income tax puroses. In such a
circumstance, no offsettg trade would be entered into; no parially related entity would purchase
the Shares from the Parership; and the Parership would not sell the Shares for a financial
instrent designed to mic the.retu which could have been obtaied if
the Shares had been
retaied. The Shares would be sold for cash, which substantively, actuly, and irevocably changes
your economic position and therefore, more liely than not, places such a sale outside the scope of
the ruligs laid down in the cases cited by Notice 2000-44.
CHICAGO 151694 v 2. 47675.00001
M-2
JFW-1418
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