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At some point thereafter, Merrill Parent decided it wanted
to sell only the principal investments business of ML Leasing as
part of its tax strategy. Merrill Parent did not want ML
Leasing’s lease advisory business and certain other assets that
were not part of the principal investments business (collectively
referred to as the 1986 retained assets) to leave the
consolidated group. Merrill Parent decided to transfer the 1986
retained assets to other corporations within the consolidated
group in preparation for the sale of ML Leasing, leaving only the
principal investments business remaining in ML Leasing, including
the operating and leveraged lease assets.
On March 26, 1986, participants at an internal meeting of
petitioner discussed the possible sale of ML Leasing’s stock.
At the meeting, the participants discussed the estimated tax
basis of ML Leasing as of the end of 1985, the approximate value
of ML Leasing, whether the sale would be prohibited because of
various restrictions in the lease documents, the intangible
effects of the sale of ML Leasing, the possibility of tax reform
being passed prior to late August 1986, the estimated after-tax
economic benefit of the sale of ML Leasing, and the estimated
after-tax book gain that would result from the sale of ML
Leasing. At the meeting, Jeffrey Martin, a member of
petitioner’s Mergers & Acquisitions Group, was asked “to feel out
the market on a no-name basis inquiring if there are any
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