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H. Formation of OBC International Holdings, Inc.
On April 3, 1991, Otrabanda organized OBC International
Holdings, Inc. (OBC). Otrabanda transferred $98,734 in cash,
$39,892,597 of Brunswick's commercial paper, and $26,435,369 of
other commercial paper to OBC in return for all of OBC's
outstanding stock. On April 3, 1991, Otrabanda amended its
partnership agreement to provide, among other things, that
Bartolo would not pay any portion of OBC's Federal income taxes.
Brunswick filed OBC's Federal income tax return for the period
April 3 through June 21, 1991. This return reflects taxable
income of $891,134 and a tax due of $302,986. Brunswick paid the
tax due.
I. Dissolution of Otrabanda
During a June 21, 1991, Otrabanda partnership meeting,
Brunswick informed the partnership that, due to a recent
downgrading of Brunswick’s credit rating, Brunswick would have to
liquidate its investment in Otrabanda in order to reduce the
amount of its outstanding commercial paper and other borrowings.
As previously mentioned, on June 19, 1991, Moody’s had downgraded
Brunswick’s long-term debt rating from Baa1 to Baa2. See supra
p. 45. O'Brien proposed that Otrabanda be dissolved.
For purposes of Otrabanda’s audited and unaudited financial
statements, Brunswick was allocated $3,166,221, Skokie was
allocated $82,024, and Bartolo was allocated $3,289,820 of
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