- 62 -
At the time the IBJ CDs were issued, IBJ was rated Aaa by
Moody's. The IBJ CDs were not registered under the Securities
Act of 1933 and were not traded on an established securities
market.
On July 18, 1990, IBJ made a timely interest payment of
$435,416.67 to Otrabanda with respect to the IBJ CDs. (IBJ’s
July 18, 1990, interest payment was for $458,333.33, which
exceeded the interest amount due by $22,916.66. On July 31,
1990, the excess interest was reversed.) Otrabanda included this
interest payment in its interest income on its Form 1065 for the
taxable year ended July 31, 1990.
B. Otrabanda's Sale of Certificates of Deposit
Brunswick and Merrill Lynch discussed an investment in an
instrument analogous to an inverse floater, that would increase
in value as interest rates declined and decrease in value as
interest rates increased. Otrabanda did not purchase such an
instrument.
On July 24, 1990, Otrabanda held a partnership meeting at
Merrill Lynch's office in Toronto. Zelisko attended the meeting
on behalf of Brunswick and Skokie, while de Beer from ABN and
Taylor from Merrill Lynch participated in the meeting by way of
telephone conference call. The partnership committee adopted a
resolution, upon the advice of Merrill Lynch, authorizing and
directing the sale of the IBJ CDs for consideration consisting of
Page: Previous 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 NextLast modified: May 25, 2011