Merrill Lynch & Co., Inc. & Subsidiaries - Page 25




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          computers leased to IBM and had been active in other types of               
          financing for medium-sized businesses.  ML Capital Resources also           
          owned the stock of a number of subsidiary corporations that were            
          engaged in the business of arranging equity and debt financing              
          for middle- and small-sized companies.                                      
               Merrill Parent decided to sell that portion of ML Capital              
          Resources’ business consisting of the ownership of leased                   
          property.  In the aggregate, the leases were generating                     
          substantial positive cashflow but had “turned around” for income            
          tax purposes so that if ML Capital Resources continued to hold              
          them, the leases would generate taxable income in excess of                 
          pretax cashflow.  Because Merrill Parent did not want ML Capital            
          Resources’ nonleasing assets to leave the consolidated group, it            
          decided that ML Capital Resources would sell to other affiliated            
          corporations the stock of certain subsidiary corporations that              
          were engaged in lending and financing activities or that owned              
          other assets and businesses that were not related to its core               
          consumer leasing operations (collectively referred to as the 1987           
          retained assets).20                                                         
               A.  Petitioner Seeks a Purchaser                                       
               Merrill Parent decided to conduct the sale of ML Capital               
          Resources utilizing a bidding process.  By February 17, 1987, a             


               20Senior management decided which assets to sell and which             
          assets to retain within the consolidated group.                             





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