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earnings and profits that exceeded the purchase price. This is
the seventh 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.
C. The Sale of ML Capital Resources
Pursuant to the bidding procedure governing the sale of ML
Capital Resources, petitioner received five or six bids,
including one from GATX/BCE. The bid from GATX/BCE, dated April
21, 1987, contained the principal terms upon which GATX/BCE was
prepared to purchase all the outstanding shares of ML Capital
Resources (April 21, 1987, bid proposal).26 GATX/BCE proposed a
base purchase price of $63 million, plus 70 percent of certain
residual payments in excess of $27 million. GATX/BCE’s April 21,
1987, bid proposal specifically provided, among other things, the
following conditions precedent: (1) GATX/BCE would enter into a
purchase agreement only upon the receipt of all requisite
corporate approvals, including approvals by the boards of GATX
and BCE, and (2) satisfactory completion of further due
diligence. The further due diligence included, but was not
limited to, review of the basic and related documentation, review
of audited financials of the IBM partnerships and ML Capital
26Although the bidding procedure required each prospective
purchaser to submit by Mar. 27, 1987, preliminary indications of
interest outlining a proposed purchase price, the record contains
no information regarding what, if anything, GATX/BCE submitted.
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