CGF Industries, Inc. and Subsidiaries - Page 38




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          remainder interests.  This, of course, was no mere coincidence.             
          Rather, it was one of a series of steps, the cumulative effect              
          being to generate amortization deductions.                                  
               Generally, this series of events occurred as follows.17                
          First, members of petitioners' boards of directors authorized the           
          purchase of term interests in partnerships.  Second, petitioners            
          declared cash dividend distributions and/or stock redemptions               
          while, at the same time, liquidating a substantial portion of               
          their assets in U.S. Government securities, either directly or              
          through capital withdrawals in partnerships so investing.  Then             
          petitioners formed limited partnerships by taking back term                 
          interests therein, while the Family Trusts simultaneously took              
          back the remainders.  Lastly, while petitioners began offsetting            
          their distributive shares of partnership income with amortization           
          and other deductions attributable to their term interests, the              
          Family Trusts waited in the wings for their remainder interests             
          to vest in possession without the incidence of taxation.                    
               It is apparent that the transfers of funds to the Family               
          Trusts and their purchases shortly thereafter of remainder                  
          interests in the limited partnerships constituted integrated                
          transactions intended to move assets from petitioners to the                
          Family Trusts with favorable tax consequences.  Petitioners'                
          distributions to the Family Trusts, followed by the formation of            
          the CGF and Lincoln Partnerships, were not unconnected                      

               17We note that the exact order may vary somewhat depending             
          upon whether reference is made to CGF or Lincoln.                           

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