ACM Partnership, Southampton-Hamilton Company, Tax Matters Partner - Page 9

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          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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