Merrill Lynch & Co., Inc. & Subsidiaries - Page 31




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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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