- 136 -
transaction in which a substantial amount of the principal would
be consumed by dealer fees.
ACM's conduct subsequent to the Citicorp Note purchase
belies the claim that the use of the Citicorp Notes as a
temporary store for partnership cash was economically sound. The
Citicorp Note investment would not have met the criteria for
management of temporary cash balances set forth in the
partnership's Investment Guidelines, had they been in effect at
the time. But the adoption of the Investment Guidelines 2 weeks
later, like so many partnership decisions, appears to have been
scheduled to accommodate the section 453 investment strategy.
Once the Citicorp Notes had been sold, the partnership was at
liberty to follow sound investment principles. The $140 million
cash generated in the sale was invested in a diversified
portfolio of commercial paper instruments maturing after 7 days.
No liquidation costs were incurred to obtain the cash needed for
settlement of the Colgate debt purchases. But financial assets
that could be converted into cash without a sale and registered
financial assets that could be traded on an exchange at
relatively little transaction cost would not have satisfied
Colgate's tax needs.
Petitioner argues that the choice of private placement notes
allowed ACM to negotiate for a put option, "a valuable option it
could not otherwise have obtained". The logic appears to be
Page: Previous 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 NextLast modified: May 25, 2011