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projected that under normal market conditions, the MAPS strategy
would allow FPL to earn between 4 and 7 percent over Treasury bills
which were then yielding approximately 3 percent. In fact,
respondent concedes that Mr. Silverstein’s projections were
reasonable.
Relying upon Sheldon v. Commissioner, supra, and Saba v.
Commissioner, supra, respondent contends that the transaction
lacked economic substance on the ground that FPL’s potential
profits were de minimis when compared with the potential tax
benefit. In particular, respondent reasons that while FPL stood to
earn approximately $5.3 million annually on its investment, the
transaction provided the potential for FPL to save up to $118.8
million in taxes. Respondent’s computation of $118.8 million is
based upon the assumption that FPL would have been unable to use
any of its CPG loss during the applicable 5-year loss carryover
period prescribed in section 1212(a)(1)(C).
Respondent’s view of the potential tax benefit associated with
FPL’s Salina investment is significantly inflated. The record
reveals that FPL was in the process of restructuring its operations
by selling noncore businesses in order to concentrate on its
utility businesses. FPL’s sale of CPG was undertaken as part of
this restructuring. We are convinced that, as of late 1992, FPL
reasonably anticipated that it would realize substantial capital
gains over the next several years on the sale of various
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