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also directed to consider whether Saba and Otrabanda are
distinguishable from the partnership that the Court of Appeals
determined to be a sham in ASA Investerings Pship.
II. Whether Saba and Otrabanda Are Distinguishable From ASA
Investerings Partnership
Petitioner asserts that the Saba and Otrabanda partnerships
were significantly different from the ASA Investerings
Partnership, and that Saba and Otrabanda should be recognized as
valid partnerships and not shams for Federal income tax purposes.
Before addressing petitioner’s specific arguments, we briefly
review the factual background in ASA Investerings Pship. v.
Commissioner, supra.
In ASA Investerings Pship., the Commissioner issued an FPAA
to a Merrill Lynch-designed partnership whose principal partners
were AlliedSignal, Inc., and ABN. The Court of Appeals held that
the disputed partnership would not be recognized for Federal
income tax purposes on the ground it was not organized to conduct
business activity for a purpose other than tax avoidance. In so
holding, the Court of Appeals sustained this Court’s findings
that ABN did not share in the partnership’s profits and losses.
Id. at 514. The Court of Appeals agreed that the purported
partners did not share profits because “direct payments made to
ABN were to compensate it merely for its funding costs”, and “ABN
could make no profit from the transaction: any potential profit
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