As he did at the federal level, petitioner offset on his 2005 New York State return, as a deduction, a capital loss resulting from the difference between his outside tax basis and his inside tax basis in Fifth Avenue against the gain realized on the sale of the office building.
The lack of the inside-basis might have minimal effect on federal tax due, since the capital loss on liquidation of the partnership would offset the flow-through gain.
Layton and I had never been to the Blue Moon, but the idea of what and who might be inside became the basis of many of our fantasies as we floated on our backs.