United States' Motion to Exclude Expert Testimony of Plaintiffs'

LOAN PREMIUM VARIATIONThe loan premium vari tion of the Notice 2000-44transaction involves threefollows:1. The taxpayer borrows oney from a lender. The statedprincipal amount of t$2,000X, but the lenderdisburses $3,000X to he taxpayer. Two thousand dollars ofthe disbursement is r ferred to as loan principal in thetransaction documents; the other $1,000X is referred to as"loan premium." The ransaction makes economic sense fromthe lender's perspect' ve because the taxpayer willeffectively repay (am rtize) the loan premium over thecourse of the loan th ough above-market interest payments.2. The taxpayer contribuwhich assumes the tax$3,000X to a partnership,indebtedness. Thereafter thepartnership engages i investment acti vi ties.3. The taxpayer sells th partnership interest for nominalconsideration.The taxpayer takes th position that the cash contributionand debt assumption in Ste 2 gives him a $1,000X outside basisin his partnership interes After formation, a partner'soutside basis equals rtner's basis in property or amountof money contributed to th partnership (here $3,000X cash) .IRC §722. This basis is r by the amount of moneydistributed to the partner. IRC §7 33 (1)- 12 -Partnership