Saba Partnership, Brunswick Corporation, Tax Matters Partnership - Page 39




                                       - 126 -                                        
         produced an interest rate curve that gradually increased over the            
         5-year terms of the LIBOR notes.  However, respondent produced               
         evidence that a broad cross-section of economists and financial              
         experts were forecasting falling interest rates during 1990 and              
         1991.  Under the circumstances, we conclude that it was                      
         unreasonable to believe that there would be any substantial                  
         appreciation in the LIBOR notes over their 5-year terms.  That is            
         not to say that it would have been unreasonable to expect any                
         profits on an investment in the LIBOR notes, only that such                  
         profits would be limited.                                                    
              Relatively modest profits are insufficient, standing alone,             
         to clothe the disputed CINS transactions with economic substance.            
         In particular, even assuming for the sake of argument that the               
         partnerships reasonably could have expected profits of up to                 
         $10,800,000 on a 5-year investment in the LIBOR notes, such                  
         profits would be inconsequential when compared with the capital              
         losses of approximately $170,000,000 that the CINS transactions              
         were designed to generate for Brunswick.  See Sheldon v.                     
         Commissioner, 94 T.C. 738, 767-768 (1990); see also ACM                      
         Partnership v. Commissioner, 157 F.3d at 258; Goldstein v.                   
         Commissioner, 364 F.2d at 739-740.                                           
              In Yosha v. Commissioner, 861 F.2d 494, 499 (7th Cir. 1988),            
         the Court of Appeals for the Seventh Circuit stated:                         
              A transaction has economic substance when it is the                     
              kind of transaction that some people enter into without                 





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