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circular payment flows and premature terminations that insulated
the banks from a material risk with respect to the LIBOR Notes.
Respondent alleges that structured transactions involving
substantially the same patterns, timetables, and many of the same
banks were involved in the issuance and sale of LIBOR Notes for
each of the other section 453 partnerships.
Petitioner's account of the CINS transaction bears little
resemblance to respondent's view. Petitioner argues that ACM was
rationally designed to address genuine liability management
needs. Petitioner alleges that all partnership transactions were
negotiated at arm's length, priced at fair market value,
conducted in accordance with standard commercial practices, and
had practical effects wholly apart from their tax consequences.
Petitioner asserts that the partnership and each of its partners
had reasonable prospects for profit and risk of loss. Petitioner
contends that, in arranging the structured transactions, Merrill
acted in the customary role of a market maker, bringing
counterparties together on terms that suited their respective
needs. Petitioner argues that the swaps are irrelevant to the
legal analysis because ACM was not a party to any of the swaps.
Following our review of the record, with due regard to our
view and perception of the witnesses, we do not find any economic
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