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income tax purposes for lack of economic substance. Petitioner
bears the burden of proof. See Rule 142(a); Brown v.
Commissioner, 85 T.C. 968, 998 (1985), affd. sub nom. Sochin v.
Commissioner, 843 F.2d 351 (9th Cir. 1988).
As discussed in detail below, we shall sustain respondent's
adjustments on the ground that the disputed CINS transactions
lack economic substance. See ACM Partnership v. Commissioner,
157 F.3d 231 (3d Cir. 1998), affg. in part and revg. in part T.C.
Memo. 1997-115, where the Court of Appeals for the Third Circuit
affirmed this Court’s holding that virtually identical CINS
transactions arranged by Merrill Lynch lacked economic substance.
Based upon our holding in these cases, we need not decide whether
Saba and Otrabanda were valid partnerships. Cf. ASA Investerings
Partnership v. Commissioner, T.C. Memo. 1998-305, on appeal to
the Court of Appeals for the District of Columbia Circuit.
I. Evidentiary Matters
Prior to trial, petitioner asserted that certain documents
in its possession, including the Zelisko memorandum, were
privileged and not subject to discovery. After respondent moved
to compel production of the documents, the Court ordered
petitioner to submit the documents to the Court for in camera
review. On August 14, 1998, the Court issued an order holding,
among other things, that only limited portions of the Zelisko
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