Free Proposed Findings of Uncontroverted Fact - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS JZ Buckingham Investments, LLC, as Tax Matters Partner of JBJZ Partners, A South Carolina general partnership, Plaintiff, v. United States of America, Defendant. § § § § § § § § § § §

Case No. 05-231 T Chief Judge Edward Damich

PROPOSED FINDINGS OF UNCONTROVERTED FACT Pursuant to Rule 56(h)(1) of the Rules of the Court of Federal Claims, Plaintiff JZ Buckingham Investments, LLC, as Tax Matters Partner of JBJZ, a South Carolina general partnership, respectfully submits the following Proposed Findings of Uncontroverted Fact in Support of its Motion for Partial Summary Judgment as to the Validity of Treasury Regulation § 1.752-6. 1. JZ Buckingham Investments, LLC ("JZ") was formed as a limited liability

company under Delaware law on November 16, 1999. Pl. Ex. 1, App. A at pp. 1-2. 2. 3. JZ did not dissolve under Delaware law during calendar year 1999. Id. JGB Bohicket Investments, LLC ("JGB") was formed as a limited liability

company under Delaware law on November 16, 1999. Pl. Ex. 2, App. A at pp. 2-3. 4. 5. JGB did not dissolve under Delaware law during calendar year 1999. Id. JZ and JGB formed JBJZ Partners, a South Carolina general partnership (the

"Partnership") on November 16, 1999. Pl. Ex. 3, App. A at pp. 5-16.

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6.

JZ and JGB each acquired an ownership interest in the Partnership upon its

formation, and served as a general partner of the Partnership during the Partnership's tax year ending December 27, 1999. Id. 7. No election under Treas. Reg. § 301.7701-3(c) was filed with the Internal

Revenue Service by or on behalf of the Partnership to be classified as a corporation for federal income tax purposes. 8. On November 23, 1999, JZ and JGB entered into over-the-counter, non-publicly

traded European-style foreign currency option positions with Deutsche Bank AG New York Branch. (collectively, the "Options"). a. JGB purchased ­ for a premium $5,000,000.00 ­ a digital option on the

Euro/U.S. Dollar exchange rate with a strike price at less than or equal to U.S. $1.0123 per Euro 1.00, a termination date of December 22, 1999, and a final exchange amount of $10,000,000.00. Pl. Ex. 4, App. A at pp. 17-19. b. JZ purchased ­ for a premium of $20,000,000.00 ­ a digital option on the

Euro/U.S. Dollar exchange rate with strike price at less than or equal to U.S. $1.0123 per Euro 1.00, a termination date of December 22, 1999, and a final exchange amount of $40,000,000.00. Pl. Ex. 5, App. A at pp. 20-22. c. JZ purchased ­ for a premium of $25,000,000.00 ­ a digital option on the

Japanese Yen/U.S. Dollar exchange rate with a strike price at greater than or equal to Japanese Yen 106.19 per U.S. $1.00, a termination date of December 22, 1999, and a final exchange amount of $50,000,000.00. Pl. Ex. 6, App. A at pp. 23-25. d. JGB sold ­ for a premium of $4,750,000.00 ­ a digital option on the

Euro/U.S Dollar exchange rate with a strike price at less than or equal to U.S. $1.0121 per

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Euro 1.00, a termination date of December 22, 1999, and a final exchange amount of $9,375,000.00. Pl. Ex. 4, App. A at pp. 17-19. e. JZ sold ­ for a premium of $19,000,000.00 ­ a digital option on the

Euro/U.S Dollar exchange rate with a strike price at less than or equal to U.S. $1.0121 per Euro 1.00, a termination date of December 22, 1999, and a final exchange amount of $37,500,000.00. Pl. Ex. 5, App. A at pp. 20-22. f. JZ sold ­ for a premium of $23,750,000.00 ­ a digital option on the

Japanese Yen/U.S. Dollar exchange rate with a strike price at greater than or equal to Japanese Yen 106.21 per U.S. $1.00, a termination date of December 22, 1999, and a final exchange amount of $46,875,000.00. Pl. Ex. 6, App. A at pp. 23-25. 9. Under the terms of their respective sold (short) options, JZ and JGB incurred the

following obligations: a. JGB had an obligation to pay $9,375,000.00 if the Euro/U.S Dollar

exchange rate on the expiration date (or such later date as provided by the option agreement) was less than or equal to U.S. $1.0121 per Euro 1.00. Pl. Ex. 4, App. A at pp. 17-19. b. JZ had an obligation to pay $37,500,000.00 if the Euro/U.S Dollar

exchange rate on the expiration date (or such later date as provided by the option agreement) was less than or equal to U.S. $1.0121 per Euro 1.00. Pl. Ex. 5, App. A at pp. 20-22. c. JZ had an obligation to pay $46,875,000.00 if the Japanese Yen/U.S.

Dollar exchange rate on the expiration date (or such later date as provided by the option

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agreement) was greater than or equal to Japanese Yen 106.21 per U.S. $1.00. Pl. Ex. 6, App. A at pp. 23-25. 10. On November 24, 1999, JZ and JGB contributed the Options to the Partnership.

Pl. Ex. 7, App. A at pp. 26-28; Pl. Ex. 8, App. A at pp. 29-31; and Pl. Ex. 9, App. A at pp. 32-34. a. JGB did not reduce the adjusted basis in its Partnership interest for the

contribution of the sold (short) option described in paragraph 9.d above. b. JZ did not reduce the adjusted basis in its Partnership interest for the

contribution of the sold (short) option described in paragraph 9.e above. c. JZ did not reduce the adjusted basis in its Partnership interest for the

contribution of the sold (short) option described in paragraph 9.f above. 11. On December 9, 2004, the IRS issued a notice of final partnership administrative

adjustment to the Partnership. Pl. Ex. 10, App. A at pp 35-46. 12. The FPAA makes the following allegation concerning the Regulation: It is determined that the obligations under the short positions (written call options) transferred to JBJZ Partners partnership constitute liabilities for purposes of Treasury Regulation § 1.7526T, the assumption of which by JBJZ Partners partnership shall reduce the purported partners' bases in JBJZ Partners partnership.... Id.

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Respectfully submitted, By: s/Joel N. Crouch Joel N. Crouch Texas State Bar No.05144220 M. Todd Welty Texas State Bar No. 00788642

MEADOWS, COLLIER, REED COUSINS & BLAU, L.L.P. 901 Main Street, Suite 3700 Dallas, TX 75202 (214) 744-3700 Telephone (214) 747-3732 Facsimile [email protected] [email protected]

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CERTIFICATE OF SERVICE I hereby certify that on March 7, 2008, a copy of the foregoing Plaintiff's Proposed Findings of Uncontrovered Facts was served upon counsel listed below via electronic means. Dennis M. Donohue, Esq. Trial Attorney United States Department of Justice Tax Division P.O. Box 26 Ben Franklin Station Washington DC 20044 (202) 616-3366 s/Joel N. Crouch Joel N. Crouch

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