ACM Partnership, Southampton-Hamilton Company, Tax Matters Partner - Page 24

                                       - 112 -                                        
               More importantly, the terms of the back-to-back hedge swaps            
          with respect to the LIBOR Notes are inconsistent with the                   
          arbitrage interpretation.  In our Findings of Fact, we discussed            
          at length the structural correspondence between these swaps and             
          the hedge swaps between Merrill Capital, BFCE, and BOT, and we              
          discussed the functional implications of that correspondence.               
          Thus, although it appears that ABN could reasonably have expected           
          to derive gain from these swaps, this gain represented value                
          transferred, through the network of structured transactions                 
          growing out of the contingent payment sale, from the partnership            
          to the banks, to Merrill Capital, and back to ABN and Kannex.               
          The section 453 investment strategy was not designed to provide             
          ABN with an opportunity for profitable LIBOR Note swaps.  On the            
          contrary, the swaps were calculated to compensate ABN in part for           
          Kannex's share of the economic loss sustained by the partnership            
          through the section 453 investment strategy.                                
               Considering the high costs of the financial engineering it             
          required and ABN's unwillingness to have Kannex share any of                
          these costs or be exposed to any of the entrepreneurial risks it            
          entailed, the section 453 investment strategy would not have been           
          consistent with rational profit-motivated behavior in the absence           
          of the expected tax benefits.                                               









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