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that Commercial would be removed from the joint ventures, while
receiving as much cash as possible. The agreement terms,
however, cast this as a contribution to capital by entities
seeking complete financial disassociation from the partnerships.
The April 19, 1988, letter prepared on behalf of Commercial
expressed the continuing desire to end its relationship with
Parker Properties and Twenty Mile, including its equity
involvement through ESL. On April 25, 1988, Commercial’s
attorney prepared a memorandum to the client’s file which
detailed the April 21 and 22, 1988, meetings. That memorandum
contains mention of Mr. Nicholson negotiating with Sun Savings
"for enough funds to take out Empire entirely."
Petitioners maintain that the Agreement provided for a
capital contribution in excess of $4.8 million. However, the
June 20, 1988, draft of the Agreement indicated that ESL was
willing to sell its interests in Parker Properties and Twenty
Mile for a mere $10,000. Petitioners counter that this is
because Commercial was ultimately relieved of exposure to over $8
million in liabilities, and, thus, there was a valid business
purpose.
We find, however, that any such liability relief was a
practical consequence of the plan. Commercial wanted out of the
joint ventures entirely; it was not seeking to cancel the debt in
order to become a new investor. Furthermore, ESL sold its
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