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attributable to the sale of the PPNs and LIBOR notes) and various
fees (i.e., Merrill Lynch's legal, accounting, and various
financial services fees).
Barber and Dominguito collectively contributed $990 million
to ASA and ultimately received $1,046,720,226. The
$1,046,720,226 consisted of: $540,600,000 from AlliedSignal's
August 2, 1990, purchase of all of Barber's, and a portion of
Dominguito's, interests; $168,860,297 from redemptions of
Dominguito's interest; $331,543,679 in income and property
distributions to Barber and Dominguito; and $5,716,250 in direct
payments from AlliedSignal to Barber, Dominguito, and ABN. ABN
ultimately received all payments to Barber and Dominguito. In
addition, ABN received $5,851,355 from its swap transactions.
XIII. Respondent's Determinations
On September 27, 1996, respondent issued the FPAA. In the
FPAA, respondent disallowed the capital gain, portfolio income,
portfolio expenses, and a portion of the basis in the LIBOR notes
reported by ASA. Respondent reallocated 90 percent of such items
to AlliedSignal and 10 percent of such items to ASIC.
In the FPAA, respondent contends that ASA is not a valid
partnership and that Barber and Dominguito are not partners. As
an alternative position, respondent contends that the
transactions lack economic substance. Respondent further states
that if this contention is sustained, "no gain will be realized
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