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1990 and 1991 based on alternative determinations that (1) Saba
and Otrabanda were sham partnerships that should be disregarded
for Federal income tax purposes; and (2) the partnerships’
purported contingent installment sale transactions (CINS
transactions) under section 453 were shams that should be
disregarded for Federal income tax purposes. Unless otherwise
indicated, section references are to the Internal Revenue Code in
effect for the years in issue, and Rule references are to the Tax
Court Rules of Practice and Procedure.
Petitioner in these cases is Brunswick Corporation, the
partnerships’ tax matters partner (Brunswick or petitioner).
In Saba I, we described in detail Brunswick’s divestiture of
certain of its business lines, its discussions with
representatives of Merrill Lynch regarding a tax shelter that the
latter was marketing to certain U.S. corporations, its decision
to join with Algemene Bank Nederlands N.V. (ABN) to form the
partnerships known as Saba and Otrabanda, and the partnerships’
purported CINS transactions. We held that the disputed CINS
transactions were not motivated by legitimate nontax business
purposes, nor were they imbued with objective economic substance.
Consequently, we held that the CINS transactions were shams that
would not be respected for Federal income tax purposes.
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