Merrill Lynch & Co., Inc. & Subsidiaries - Page 4




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               David J. Curtin, Sheri Dillon, Peter J. Genz, William F.               
          Nelson, Kimberly S. Piar and Cornelia J. Schnyder, for                      
          petitioner.                                                                 
               Carmen M. Baerga, Jill A. Frisch, Lyle B. Press, and Jody S.           
          Rubinstein, for respondent.                                                 

               MARVEL, Judge:  Respondent determined the following                    
          deficiencies in the Federal income tax of Merrill Lynch & Co.,              
          Inc. (Merrill Parent) and subsidiaries (collectively, the                   
          consolidated group or petitioner):                                          
                           TYE                    Deficiency                          
                    Dec. 26, 1986                 $7,704,908                          
               Dec. 25, 1987                      12,141,242                          
               Dec. 30, 1988                      12,928,981                          
               The ultimate issue in this case involves the proper                    
          computation of petitioner’s basis in the stock of two                       
          consolidated group members (the target corporations) that it sold           
          in 1986 and 1987.  In order to resolve that issue, we must decide           
          the tax effect of nine cross-chain sales1 of stock of certain               
          subsidiaries (the issuing corporations) owned by the target                 
          corporations.  These sales were structured by petitioner to                 
          transfer certain assets from the target corporations to other               
          members of the consolidated group (the acquiring corporations)              



               1For purposes of this opinion, a cross-chain sale means a              
          sale by one brother-sister corporation to another brother-sister            
          corporation in the same ownership chain.                                    





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