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vessel was completed during 1983, petitioner did not wish to show
it as an asset on its balance sheet, so petitioner arranged a
series of transactions that permitted it to lease rather than own
the vessel. For purposes of the legal question we consider, it
is only necessary to understand that petitioner leased the vessel
and then, several years later, wanted to be relieved from the
burdensome terms of the lease. Under the agreements, petitioner
had the choice of paying either to terminate the lease or to
acquire the vessel. Petitioner chose to acquire the vessel under
the terms of the agreements. By acquiring the vessel, however,
petitioner effectively terminated the burdensome lease.
We describe the following transactional steps employed for
purposes of completeness: (1) The vessel was transferred to a
trust created by Merrill Lynch Leasing, Inc. (Merrill Lynch), and
of which Bankers Trust Co. (Bankers) was trustee; (2) Bankers, as
trustee, entered into a Bareboat Charter6 through January 3,
2004, (20 years) with a partnership named Union Marine Transport
Co. (UMTC), which consisted of two equal partners--petitioner’s
subsidiary, Chemical Marine Fleet, Inc., and a subsidiary of
Marine Transport Lines, Inc. (MTL), an unrelated entity that
petitioner had previously utilized for operation and management
of its oceangoing transport of chemicals; (3) UMTC concurrently
6 This was described by the parties as a long-term lease of
a ship.
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