ASA Investerings Partnership, Alliedsignal Inc., Tax Matters Partner - Page 30

                                                    - 30 -30                                                      

             Petitioner contends that AlliedSignal and ABN joined together for                                    
             the common purpose of investing in interest bearing instruments                                      
             and sharing the profits and losses therefrom.  We disagree for                                       
             reasons that we summarize here and explain at greater length                                         
             below.                                                                                               
                    AlliedSignal and ABN had divergent business goals.                                            
             AlliedSignal entered into the venture for the sole purpose of                                        
             generating capital losses to shelter an anticipated capital gain.                                    
             In pursuing this goal, AlliedSignal chose to ignore transaction                                      
             costs, profit potential, and other fundamental business                                              
             considerations.  In fact, AlliedSignal's Board and the Board's                                       
             Executive Committee focused only on potential tax benefits when                                      
             they approved the plan.                                                                              
                    In contrast, ABN entered into the venture for the sole                                        
             purpose of receiving its specified return.  This return was                                          
             independent of the performance of ASA's investments (e.g., the                                       
             profitability of the LIBOR notes) and the success of the venture                                     
             (i.e., whether AlliedSignal succeeded in generating capital                                          
             losses).  Moreover, as will be explained, ABN did not have any                                       
             profit potential beyond its specified return and did not have any                                    
             intention of being AlliedSignal's partner.  In essence, we agree                                     
             with Justice Frankfurter's statement that if an arrangement does                                     
             not put all parties "in the same business boat, then they cannot                                     
             get into the same boat merely to seek * * * [tax] benefits".                                         





Page:  Previous  20  21  22  23  24  25  26  27  28  29  30  31  32  33  34  35  36  37  38  39  Next

Last modified: May 25, 2011