- 9 -
ABC would have to recognize gain in each of these years to the
extent that the year's payments exceeded $25. To the extent that
the year's payments were less than $25, the law firm advised, ABC
would not be allowed to recognize a loss in that year, but ABC
would have to carry over that "loss" to a later year in which it
would otherwise recognize enough gain on the sale to absorb all
or part of the "loss". The law firm advised that any
unrecognized loss on the sale would be recognized in the final
year of payment.
In a series of telephone calls in early July 1989,
Pohlschroeder revisited Merrill's proposal with Yordan, Taylor,
and Fields. Pohlschroeder communicated a number of concerns that
Colgate had regarding the management of its debt. Pohlschroeder
wondered whether there was a way to combine Colgate's financial
objectives with Merrill's proposal. On July 18, 1989, Taylor
called Pohlschroeder back with a suggestion for resolving the
problem. The gist of the conversation can be reconstructed from
Pohlschroeder's handwritten notes:
Mac
Invest. partnership
Based on bus. purpose
Economic profit
Is this partnership profitable?
Every single step to be substantiated
Invest in your own debt
Consolidation of effective control but not
majority ownership
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