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on its consolidated Federal income tax return, Brunswick would
have reported a short-term capital loss attributable to Saba of
$84,344,913.
I. Partial Redemption of Sodbury's Partnership Interest
On September 14, 1990, Saba distributed $60,204,145 in cash
to Sodbury in redemption of a 35-percent partnership interest.
For purposes of determining the amount to be distributed in the
redemption, Pepe valued the remaining Norinchukin LIBOR note held
by Saba at $9,680,000. The $9,680,000 amount included a $375,000
private placement discount (25 percent of the original $1,500,000
private placement discount) and $133,750 (25 percent of the
unidentified $535,000 "fee").
After the September 14, 1990 distribution, Brunswick held a
89.181882-percent partnership interest in Saba, Skokie held an
.8181818-percent partnership interest, and Sodbury held a 10-
percent partnership interest.
On September 14, 1990, Sodbury transferred the $60,204,145
that it received from Saba to ABN to be applied as a credit
against its loan account.
J. Payments on Norinchukin LIBOR Note
Norinchukin made timely payments to Saba on the remaining
LIBOR note between October 1990 and April 1991. Saba amortized
the LIBOR note payments for tax purposes and reported imputed
interest as follows:
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