Merrill Lynch & Co., Inc. & Subsidiaries - Page 16




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          July 24, 1986, pursuant to which ML Asset Management agreed to              
          purchase all of ML Leasing’s Merlease stock for a purchase price            
          of $73,320,471.  The sale closed on July 24, 1986.  Immediately             
          before ML Asset Management purchased the stock of Merlease, ML              
          Asset Management’s accumulated earnings and profits exceeded the            
          price it paid for the Merlease stock.  The parties agree that the           
          sale of Merlease to ML Asset Management was a section 304                   
          transaction.                                                                
               D.  Presentation to Merrill Parent’s Board of Directors                
               On July 28, 1986, only 4 days after the cross-chain sale of            
          Merlease, a formal presentation was made to Merrill Parent’s                
          board of directors regarding the sale of ML Leasing.11  The                 
          presentation included the distribution of a written summary and             
          slides illustrating the details of the plan for the sale of ML              
          Leasing, including key calculations.  The written summary began             
          as follows:                                                                 
               We have identified a significant economic benefit,                     
               based on an opportunity in the tax law, in selling                     
               Merrill Lynch’s proprietary lease business.  This                      
               economic benefit can be achieved by structuring a                      
               transaction to sell the stock of our primary leasing                   
               subsidiary, Merrill Lynch Leasing.  We believe that                    
               such a sale could realistically result in an after-tax                 
               financial statement gain of approximately $104 million.                
          The presentation laid out the various steps of the plan to                  



               11Petitioner was unable to locate the minutes of the meeting           
          of the board of directors on July 28, 1986, the date the                    
          presentation was made.                                                      





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