- 129 -
CINS transactions, with their attendant intricate investments in
the PPNs, CDs, LIBOR notes, money market accounts, hedges, swaps,
etc., all carefully masterminded by Merrill Lynch, did not
meaningfully change Brunswick’s economic position, and it
therefore lacked the requisite economic substance necessary to
validate Brunswick’s targeted capital losses.
C. Conclusion
In sum, broad parallels may be drawn between the CINS
transactions at issue herein and the purported reorganization
deemed a sham in Gregory v. Helvering, 293 U.S. 465 (1935). We
find that the CINS transactions served no valid business purpose,
but they were designed and implemented to take the form of a CINS
in a well-scripted attempt to take advantage of an unintended
loophole in the contingent installment sale rules. Although the
partnerships can claim ownership of substantial investments, the
disputed transactions were structured to minimize the
partnerships' exposure to risk and for no other purpose than to
generate fictional tax losses for Brunswick.
The CINS transactions were carried out in these cases in an
effort to exploit rather than to respect the principle that
contingent installment sales should be reported in a manner
intended reasonably to match gains and losses. As the Court of
Appeals for the Third Circuit aptly concluded in ACM Partnership
v. Commissioner, 157 F.3d at 252:
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