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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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