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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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