§723 — Basis of property contributed to partnership

Basis in Encol Receivables Pursuant to section 723, the basis of property contributed to a partnership by a partner shall be the partner’s adjusted basis at the time of the contribution.

Pursuant to section 723, Mill Road 36 took from its contributing partners a “carry-over” basis of $428,317 in the Mill Road Tract.

We hold that petitioner has failed to prove CRC’s adjusted basis in the client-based intangibles distributed to Newman PLLC and Town PS, and we therefore assign zero-dollar bases to these assets.57 Accordingly, with a collective fair market value of $742,569 and a zero-dollar basis, the unrealized gain in

Epsolon calculated its basis in the newly contributed options pursuant to section 723 and received a carryoverbasis in the options; and Sligo calculated its basis in its Epsolon partnership interest pursuant to sections 722 and 755.

taxpayers: As a consequence of this tiered partnership arrangement, Rogers and petitioners argue that pursuant to section 723, Arapua's tax basis in its receivables carried over to Warwick.

" Section 723 provides in pertinent part that the basis of property contributed to a partnership by a partner is the ad- justed basis of such property to the contributing partner at the time of the contribution .

Each partner’s proportionate share of the partnership’s basis in its property is referred to as “inside basis.” Cf. Gindes v. United States, 228 Ct. Cl. 632, 661 F.2d 194, 197 n.9 (1981). Under section 704(c)(1)(A), items of income, gain, loss, and deduction with respect to property contributed to a partnership by a partner are specially

The Commissioner argues that the company's basis in the notes is zero because Mantor's and Smith's bases in them were each zero. 4(...continued) tells us that we can redetermine affected items (with the exception ofcertain penalties) and other nonpartnership items only at the individual level and not in a partnership-level proceeding. -

med for Federal tax purposes between Arapua and Jetstream; (2) Arapua never made a valid contribution ofthe consumer receivables to the purported partnership under section 721; (3) these receivables should not receive carryoverbasis treatment under section 723; and (4) Arapua's claimed contribution and subsequent redemption from the purportedpartnership should be collapsed into a single transaction and recharacterized as a simple sale ofthe receivables.

retailer; (2) whether this Brazilian retailer made a valid contribution of the consumer receivables to the purported partnership under section 721;1 (3) whether these receivables should receive carryover basis treatment under section 723; (4) whether the Brazilian retailer's claimed contribution and subsequent redemption.from the purported partnership should be collapsed into a single transaction and recharacterized as a sale of the receivables; and (5) whether the section 6662 accuracy-related

retailer; (2) whether this Brazilian retailer made a valid contribution of the consumer receivables to the purported partnership under section 721;1 (3) whether these receivables should receive carryover basis treatment under section 723; (4) whether the Brazilian retailer's claimed contribution and subsequent redemption.from the purported partnership should be collapsed into a single transaction and recharacterized as a sale of the receivables; and (5) whether the section 6662 accuracy-related

retailer; (2) whether this Brazilian retailer made a valid contribution of the consumer receivables to the purported partnership under section 721;1 (3) whether these receivables should receive carryover basis treatment under section 723; (4) whether the Brazilian retailer's claimed contribution and subsequent redemption.from the purported partnership should be collapsed into a single transaction and recharacterized as a sale of the receivables; and (5) whether the section 6662 accuracy-related

retailer; (2) whether this Brazilian retailer made a valid contribution of the consumer receivables to the purported partnership under section 721;1 (3) whether these receivables should receive carryover basis treatment under section 723; (4) whether the Brazilian retailer's claimed contribution and subsequent redemption.from the purported partnership should be collapsed into a single transaction and recharacterized as a sale of the receivables; and (5) whether the section 6662 accuracy-related

retailer; (2) whether this Brazilian retailer made a valid contribution of the consumer receivables to the purported partnership under section 721;1 (3) whether these receivables should receive carryover basis treatment under section 723; (4) whether the Brazilian retailer's claimed contribution and subsequent redemption.from the purported partnership should be collapsed into a single transaction and recharacterized as a sale of the receivables; and (5) whether the section 6662 accuracy-related

retailer; (2) whether this Brazilian retailer made a valid contribution of the consumer receivables to the purported partnership under section 721;1 (3) whether these receivables should receive carryover basis treatment under section 723; (4) whether the Brazilian retailer's claimed contribution and subsequent redemption.from the purported partnership should be collapsed into a single transaction and recharacterized as a sale of the receivables; and (5) whether the section 6662 accuracy-related

retailer; (2) whether this Brazilian retailer made a valid contribution of the consumer receivables to the purported partnership under section 721;1 (3) whether these receivables should receive carryover basis treatment under section 723; (4) whether the Brazilian retailer's claimed contribution and subsequent redemption.from the purported partnership should be collapsed into a single transaction and recharacterized as a sale of the receivables; and (5) whether the section 6662 accuracy-related

disallowed. 8. It is determined that the adjusted bases of the long call positions (purchased call options), zero coupon notes, and other contributions purportedly contributed by the partners to Evergreen Trading, LLC has not been established under I.R.C. § 723. It is consequently determined that the partners of Evergreen Trading, LLC have not established adjusted bases in their respective partnership interests in an amount greater that zero (-0-). 9. It is further determined that, in the case

ed section 357(c) to refer to the transferee corporation’s adjusted basis in its property. Lessinger v. Commissioner, 872 F.2d at 526. Here, by contrast, section 722 keys its analysis to the transferor partner’s basis (and, for that matter, so does section 723). The Second Circuit expressed doubt that the transferor taxpayer had basis in his promise to pay the corporation. Lessinger v. Commissioner, 872 F.2d at 525 (“The taxpayer could, of course, have no ‘basis’ in his own promise to pay the co

Asserting that they had inherited a carryovertax basis in the Arapua receivables under section 723, the trading companies then claimed deductions in the amount ofthe excess oftheir asserted tax bases over the receivables' fair market value.

Asserting that they had inherited a carryovertax basis in the Arapua receivables under section 723, the trading companies then claimed deductions in the amount ofthe excess oftheir asserted tax bases over the receivables' fair market value.

Under section 723, American Boat took bases in the tugboats (inside basis) equal to American Milling's bases in the tugboats before the contribution. Likewise, under section 722, American Milling's initial basis in its American Boat partnership interest (outside basis) was equal to its bases in the tugboats before the contribution. American Boat asserted

a single-memberLLC; (cid:16)042 form a partnership with a third party or wholly owned LLC; (cid:16)042 contribute the foreign-currency options and Canadian dollars to the partnership; 5 Inside basis is the basis a partnership has in its own assets, sec. 723; outside basis is the basis a partner has in his partnership interest, sec. 722; sec. 1.722-1, Example (1), Income Tax Regs. 6 We refer elsewhere in this opinion to such options as "long options" and "short options." "Long" can mean several

723, a partnership's basis in contributed property is "the (continued...) - 24 - comparison, its partners' aggregate adjusted basis in their partnership interests, or outside basis, was $3,400,718. B. Basis Boost On December 1, 1999, Mr. Carroll, Ms. Cadman, and Ms. Craig, who were CCFH's only shareholders, purported to transfertheir respecti

723, a partnership’s basis in contributed property is “the adjusted basis of such property to the contributing partner at the time of the contribution” — that is, a transferred basis — so CNT would have taken CCFH’s tax basis in the real estate since neither one recognized any gain that could have added to that basis. Sec. 708(b)(1)(B) provide

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

e. SERVED Oct 16 2014 - 2 - Brazilian retailers purportedly contributed distressed consumer receivables to a limited liability company, S, treated as a partnership for Federal income tax purposes. S claims carryoverbases in these receivables under I.R.C. sec. 723. In 2004 S in turn contributed some ofthese Brazilian receivables to trading companies and contributed its interest in each trading company to a holding company. S claimed a cost ofgoods sold for each holding company equal to the basis

imed contributions to and subsequent redemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale of the receivables, such that the receivables had a cost basis under section 1012 rather than a carryover basis under section 723; (4) whether the 2004 partnership transactions had economic substance; (5) whether the 2004 partnership transactions satisfied the statutory prerequisites for a section 166 deduction; (6) whether the 2005 trust transactions should be coll

djurisdiction because the petitioners argued we lacked it. But we agree with the Commissioner that outside basis isn't at issue here. What is at issue are the partnerships' inside bases. Inside basis is the basis a partnership has in its own assets, sec. 723; outside basis is the basis a partner has in his partnership interest, sec. 722; sec. 1.722-1, Example (1), Income Tax Regs. Ifthe inflated basis in a Son-of-BOSS deal is attached to a partner's interest in a supposed partnership and a loss

djurisdiction because the petitioners argued we lacked it. But we agree with the Commissioner that outside basis isn't at issue here. What is at issue are the partnerships' inside bases. Inside basis is the basis a partnership has in its own assets, sec. 723; outside basis is the basis a partner has in his partnership interest, sec. 722; sec. 1.722-1, Example (1), Income Tax Regs. Ifthe inflated basis in a Son-of-BOSS deal is attached to a partner's interest in a supposed partnership and a loss

djurisdiction because the petitioners argued we lacked it. But we agree with the Commissioner that outside basis isn't at issue here. What is at issue are the partnerships' inside bases. Inside basis is the basis a partnership has in its own assets, sec. 723; outside basis is the basis a partner has in his partnership interest, sec. 722; sec. 1.722-1, Example (1), Income Tax Regs. Ifthe inflated basis in a Son-of-BOSS deal is attached to a partner's interest in a supposed partnership and a loss

y purported capital contribution ofsubstantially all ofthe partnership interests in the lower tierpartnership to the upper tierpartnership. Following this capital "Inside basis refers to the partnership's basis in partnei·ship property. See enerally sec. 723 (providing that the basis ofpropertycontributed to a partnership by a partner shall be the adjusted basis ofsuch propertyto the contributing partner at the time ofcontribution, increased by the amount ofany gain recognized at contribütion) s

partnership income, gain, loss, deduction and credit); sec. 733 (providing rules for adjustments to the basis ofa partner's partnership interest to account for distributions from the partnership to the partner). " Family, presumablyunder authority ofsec. 723, inherited Business Trust's inflated outside basis. " Mr. Rawls subsequently sold his interest in JSRMC to Heritage. - 13 - [*13] Group, now presumably a "single member disregarded entity",16 continued to remain liable for the obligation to

to 2iCapital contributions are to be reported by a partnership at fair market value rather than the cost or adjusted basis ofthe contributed property to the contributing partners, which is the "inside basis" ofsuch property to the partnership under sec. 723. Secs. 1.704-1(b)(2)(iv)(b), 1.705-1(a)(1), Income Tax Regs.; see also Interhotel Co. v. Commissioner, T.C. Memo. 2001-151; Mitchell v. Commissioner, T.C. Memo. 1997-382 n.5. Because ofthe short time (less than 1 month) between the option par

med for Federal tax purposes between Arapua and Jetstream; (2) Arapua never made a valid contribution ofthe consumer receivables to the purported partnership under section 721; (3) these receivables should not receive carryoverbasis treatment under section 723; and (4) Arapua's claimed contribution and subsequent redemption from the purportedpartnership should be collapsed into a single transaction and recharacterized as a simple sale ofthe receivables.

med for Federal tax purposes between Arapua and Jetstream; (2) Arapua never made a valid contribution ofthe consumer receivables to the purported partnership under section 721; (3) these receivables should not receive carryoverbasis treatment under section 723; and (4) Arapua's claimed contribution and subsequent redemption from the purportedpartnership should be collapsed into a single transaction and recharacterized as a simple sale ofthe receivables.

med for Federal tax purposes between Arapua and Jetstream; (2) Arapua never made a valid contribution ofthe consumer receivables to the purported partnership under section 721; (3) these receivables should not receive carryoverbasis treatment under section 723; and (4) Arapua's claimed contribution and subsequent redemption from the purportedpartnership should be collapsed into a single transaction and recharacterized as a simple sale ofthe receivables.

In that regard, the Explanation of Items determined that (1) the partners “have not established [under section 723] adjusted bases in their respective partnership interests in amounts greater than zero”; (2) “the purported partners of Tigers Eye did not enter into the option positions and Tigers Eye did not purchase the foreign currency or [listed] stock with a profit motive for purposes of section 165(c)(2)”; and (3) the obligations under the sold

The upper tier partnership would claim, under authority of section 723, that its basis in these assets is the same as the inflated outside basis in the lower tier partnership at the time of the capital contribution.

-33- These general rules do not apply, however, where, as here, the facts establish that one or more of the r levant transactions is not in substance a contribution to a partnership as it purports to be. The substance of the transactions at hand, as we find on the basis of the credible evidence in the record, is that Mr. Valdez, in his i

the adjusted bases of the purchased options .and other property'purportedly contributed by the partners to Tigers Eye have not been established under section 723 so that-the partners of Tigers Eye have not established adjusted bases in thei r respective partnership interests in an amount greater than zero; 7 .

has not been established under § 723 of the Internal Revenue Code .

And under section 723,' that basis would travel with the option to 7050 when it was contributed .

It is consequently determined that the partners of Petaluma FX Partners, LLC have not established adjusted bases in their respective partnership interests in an amount greater than zero (-0-) . 8 . It is further determined that', in the case of a sale, exchange, or liquidation of Petaluma FX Partners, LLC partners' partnership interests, ne

It is consequently determined that the partners of New Millennium Trading, L .L .C . have not established adjusted bases in their respective partnership interests in an amount greater than zero (-0-) . 7 . It is further determined that, in the case of a sale, exchange, or liquidation of New Millennium Trading, L.L .C . partners' partnership

It is consequently determined that the partners of New Millennium Trading, L.L.C. have not established adjusted bases in their respective partnership interests in an amount greater than zero (-0-). 7. It is further determined that, in the case of a sale, exchange, or liquidation of New Millennium Trading, L.L.C. partners’ partnership interes

It is consequently determined that the partners of Petaluma FX Partners, LLC have not established adjusted bases in their respective partnership interests in an amount greater than zero (-0-). 8. It is further determined that, in the case of a sale, exchange, or liquidation of Petaluma FX Partners, LLC partners’ partnership interests, neithe

Outside basis is an individual partner’s basis in his interest in the partnership itself. When a partner contributes both cash and property to a partnership, his outside 9 SEC. 708(b). Termination.-- (1) General Rule.--For purposes of subsection (a), a partnership shall be considered as terminated only if-- * * * * * * * (B) within a 12-m

Outside basis is an individual partner’s basis in his interest in the partnership itself. When a partner contributes both cash and property to a partnership, his outside basis is initially equal to the amount of cash plus his adjusted basis in the contributed property. Sec. 722; sec. 1.722-1, Example (1), Income Tax Regs. Outside basis in

wer compliance costs, which seemingly would offset, at least to some extent, any pricing effect of relatively lax investor protections. 20 Although MIL inherited any unrealized gain with respect to assets contributed by the initial MIL partners, see sec. 723, the portion of such precontribution gain otherwise allocable to a subsequent purchaser of an interest in MIL, see sec. 1.704- 3(a)(7), Income Tax Regs., generally would be eliminated if the (continued...) - 36 - cited by Dr. Bajaj (the init

In his petition, petitioner did allege that TBP received the farm from Alpha in exchange for Alpha’s receipt of an interest in TBP and, accordingly, that section 723 operated to give TBP a transferred basis in the farm.

petitioner’s contention that the legislative history of section 32(c)(2)(B)(iv) supports his interpretation of the provision. Section 32(c)(2)(B)(iv) was enacted as an amendment to section 32 under the Uruguay Round Agreements Act, Pub. L. 103-465, sec. 723, 108 Stat. 5003 (1994). H. Rept. 103-826, at 182 (1994) explains the purpose for section 32(c)(2)(B)(iv) as follows: 3. Income of prisoners disregarded in determining earned income tax credit (sec. 723 of the bill and sec. 32 of the Code) Re

In this case, a section 708(b) constructive termination would have occurred due to the sale of more than a 50-percent partnership interest. The assets of Bowlen I, including the Broncos franchise and professional football player contracts, would be deemed to have been distributed to Bowlen and Adams and recontributed to a new partnership.

In this case, a section 708(b) constructive termination would have occurred due to the sale of more than a 50-per-cent partnership interest. The assets of Bowlen I, including the Broncos franchise and professional football player contracts, would be deemed to have been distributed to Bowlen and Adams and recontributed to a new partnership