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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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