Merrill Lynch & Co., Inc. & Subsidiaries - Page 30




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          Asset Management had accumulated earnings and profits that                  
          exceeded the purchase price.  This is the sixth cross-chain sale            
          at issue for the taxable year ended December 25, 1987.  The                 
          parties agree that this cross-chain sale was a section 304                  
          transaction.                                                                
               3.  Leasing Equipment                                                  
               By resolutions dated April 3, 1987, the respective boards of           
          ML Capital Resources and Merrill Lynch, Pierce, Fenner & Smith,             
          Inc. (MLPFS), a first-tier wholly owned subsidiary of Merrill               
          Parent, approved the sale of all the stock of ML Leasing                    
          Equipment Corp. (Leasing Equipment or MLLE), a wholly owned                 
          subsidiary of ML Capital Resources, to MLPFS.25  ML Capital                 
          Resources and MLPFS entered into a stock purchase agreement dated           
          April 3, 1987.  The purchase price for Leasing Equipment’s stock            
          was $119,819,690.  The sale closed on April 3, 1987.  Immediately           
          before its purchase of Leasing Equipment, MLPFS had accumulated             



               24(...continued)                                                       
          of ML Interfunding as of Mar. 30, 1987, was $181,080,000.  Based            
          on such appraisal, ML Asset Management and Consumer Markets, as             
          assignee of ML Capital Resources’ rights under the ML                       
          Interfunding stock purchase agreement, agreed that ML Asset                 
          Management would pay Consumer Markets $26,413,365 as the final              
          payment of the purchase price for the ML Interfunding stock,                
          which was the difference between $181,080,000 and the net                   
          consideration paid at closing of $154,666,635.                              
               25On Apr. 2, 1987, ML Capital Resources contributed the                
          stock of MLL Corporate Partners, Inc., a subsidiary of ML Capital           
          Resources engaged in nonleasing activities, to Leasing Equipment.           






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