Partnership Has No Basis in $610 Million German Note, Court Says

A German holding company and a partnership both have zero basis in a $610 million promissory note contributed to one of the holding company’s subsidiaries, the US Tax Court held Monday, granting the IRS summary judgment.

German holding company CSC Computer Sciences GmbH, known as CSC Germany, issued the promissory note to its wholly-owned German subsidiary CSC Financial GmbH, and that note was contributed to a Nevada partnership with three partners, including Continental Grand Limited Partnership.

Because CSC Financial elected to be disregarded as an entity separate from its parent, CSC Germany must be treated for tax purposes as if ...