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compensated for their interests. Thus, neither price is reliable
evidence of the value of the intangibles.”
Petitioners’ declaration that the price was an unreliable
measure of the value of the intangibles because the parties were
related undermines their position. Every transaction that
occurred between TM, Gatetown, Manver, MTNV/MSI, MANV/MDT, etc.,
involved related parties because all or substantially all of the
shareholders in the companies were the same. Extending
petitioners’ analysis, the price in all of the transactions
between the parties would be unreliable. We believe that the
subsequent sale of the intangibles from Gatetown to Manver for
$5.6 million not more than 3 months after Gatetown purchased the
intangibles for $7,312 is evidence of the unreliability of the
transaction price and evidence that the transactions were not at
arm’s length.
The subsequent transactions that affected the years in issue
are based on these original transactions. The attempt to create
a chain of possession of the intangibles from TM to Gatetown to
Manver is implausible for several reasons. The foremost reason
is that MTNV, and not TM, owned the intangibles. Additionally,
the documents were backdated, many of them were unsigned, and
there were numerous versions of documents purporting to represent
the same transactions. The documents that were received by C&L
on December 12, 1986, contained an agreement dated May 26, 1986,
where TM purportedly sold the rights to the intangibles to Manver
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