T.C. Memo. 1997-115
UNITED STATES TAX COURT
ACM PARTNERSHIP, SOUTHAMPTON-HAMILTON COMPANY,
TAX MATTERS PARTNER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10472-93. Filed March 5, 1997.
In 1988, C reported a $105 million capital gain.
In 1989, M, an investment banking firm, approached
C with an elaborate scheme to shelter that gain from
Federal income tax. Pursuant to M's advice, A, C, and
M created an offshore partnership (P) in which their
respective initial interests were 82.63, 17.07, and
.29 percent. P served as the vehicle for a contingent
installment sale transaction (CINS transaction) that
would create approximately $100 million of capital
losses for C, a domestic corporation, and corresponding
capital gains for A, a foreign corporation that was not
subject to U.S. tax. Pursuant to the scheme, P
purchased securities and, approximately 3 weeks later,
sold most of the securities for cash and LIBOR Notes.
The value of the total consideration received, in the
form of cash and LIBOR Notes, equaled the price that P
had paid for the securities sold. The transactions and
the returns connected thereto were the result of a
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