Saba Partnership, Brunswick Corporation, Tax Matters Partner - Page 19




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               Like the $535,000 fee that made its way into Merrill Lynch’s           
          valuation of Saba’s LIBOR notes, we find it incredible that                 
          Brunswick was unaware that Merrill Lynch added the private                  
          placement discounts to the value of the LIBOR notes.  Just as               
          before, we charge Brunswick with knowledge of Merrill Lynch’s               
          valuation methodology inasmuch as Merrill Lynch’s valuation                 
          letters were provided to Saba and Otrabanda and were relied upon            
          by Brunswick to determine the price that it would pay for 50                
          percent of Sodbury’s and Bartolo’s partnership interests.  Saba             
          I, slip op. at 38-40, 67-68.                                                
               We also reject petitioner’s assertion in its reply brief               
          that Brunswick’s absorption of the transaction costs relating to            
          the purchases and sales of the PPNs, CDs, and LIBOR notes “was              
          not the result of any agreement between ABN and Brunswick”.  As             
          den Baas’ August 7, 1989, memorandum and the Zelisko memorandum             
          plainly show, ABN and Brunswick understood at the outset that the           
          LIBOR notes would be distributed to Brunswick as a required                 
          element in its tax-avoidance plan.  Consequently, it follows that           
          Brunswick and ABN must have agreed in advance that Brunswick                
          would absorb the partnerships’ expenses and losses and that a               
          large portion of those expenses and losses would be transferred             
          to Brunswick through the valuation of the LIBOR notes.                      
               We are not persuaded by petitioner’s contention that ABN and           
          Brunswick would have shared in the partnerships’ potential losses           






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