IRS Offers Resolution on Tiered Partnership Tax Straddle

This letter is to inform you that Appeals has evaluated the issues present in the transaction described in Notice 2002-50.

Under Delegation Order 4-25, the Service proposes to resolve issues related to the Tired Partnership Tax Straddle transaction, including related penalties, as described below. This offer is effective until February 16, 2006.

This resolution reflects the Appeals assessment of the hazards of litigation. Appeals has concluded that the settlement proposed in this letter is an equitable resolution of the typical case. Absent atypical facts and circumstances, you (investor or investor partner) should not expect a resolution of the tax issues on terms that are more favorable than the terms offered in this letter. If you do not accept this offer, the resolution of your case in Appeals will be based on the merits of the issues presented and may be less favorable than the terms of this letter.

If you accept this offer, the Service will resolve these issues on the following terms:

The investor partner and the Service must execute a specific matters closing agreement, Form 906, resolving the issues for all taxable years affected by these transactions in accordance with the above terms.

Full payment of the liabilities under this offer must be made by the date the closing agreement is executed. Any taxpayer not making full payment must submit complete financial statements and agree to other financial arrangements acceptable to the Service before the Service will execute the closing agreement. A taxpayer will be ineligible to participate in this offer if an agreement regarding an acceptable financial arrangement cannot be reached.

If the investor partner wishes to resolve the issues relating to the transaction described in Notice 2002-50 under the forego * * * the Service in writing by February 16, 2006. * * * the space provided and return the original to * * * by February 16, 2006. The investor partner must thereafter cooperate with the Service to finalize the resolution expeditiously.

In addition, if the Service requests supplemental information or documents necessary to effect a settlement, the investor partner must agree to provide those documents within 20 calendar days of the request. The Internal Revenue Service will grant extensions only in exceptional circumstances and subject to its sole discretion.

This is a binding settlement only if the investor partner signs the specific matters closing agreement, Form 906, and returns it to us and we sign on behalf of the Commissioner of Internal Revenue. When we sign the specific matters closing agreement, the one-year extension of the period of limitations on assessments will begin under Internal Revenue Code Section 6229(f),

If applicable, a proposed settlement will be reported to the Joint Committee on Taxation in accordance with section 6402 of the Internal Revenue Code.

If the investor partner chooses not to accept this proposed settlement, development of the case wilt continue and this can be expected to include both the substantive issues and all applicable penalties provided by Internal Revenue Code Section 6662, including gross valuation misstatement.

This settlement is solely a settlement of civil tax matters among the parties, and represents a compromise of issues based on, among other things, efficient tax administration. No statement contained herein shall be deemed to be an admission by the IRS or the Commissioner, and nothing herein shall preclude the IRS from asserting a position on the merits that is different from this settlement in contexts other than those concerning the civil tax liability of the parties. In addition, nothing herein shall preclude the IRS from pursuing, or instituting any criminal investigation and/or prosecution with respect to the conduct of any individual or entity in connection with the subject transactions.

If the investor partner has any questions, please contact the individual whose name and telephone number appear at the top of this letter.