Saba Partnership, Brunswick Corporation, Tax Matters Partner - Page 23




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          petitioner avers that, unlike ASA Investerings Pship. v.                    
          Commissioner, supra, the partners shared in the profits derived             
          from the commercial paper.                                                  
               Petitioner also argues that the Court in its original                  
          Memorandum Opinion “made a legal error in determining that                  
          Brunswick did not have a business purpose for forming Saba and              
          Otrabanda” and the Court “erred in substituting its own judgment            
          for that of Mr. Reichert [Brunswick’s chairman, president, and              
          chief executive officer] in determining whether Brunswick was               
          susceptible to a takeover and whether the partnerships would be             
          helpful in preventing a takeover.”                                          
               Respondent counters that                                               
                    There is not a shred of documentary evidence                      
               corroborating Petitioner’s purported nontax goals and                  
               no economic analysis supports them.  Brunswick never                   
               viewed the partnerships as takeover defenses; instead                  
               of advertising their alleged deterrent effect to                       
               hostile acquirers, it eliminated the partnerships from                 
               its financial statements and showed them as cash.  The                 
               LIBOR notes were useful to Brunswick only as a                         
               repository of paper tax losses; it consistently hedged                 
               its interest in the notes and sold them immediately                    
               after receiving them to avoid tax.  Given the                          
               transactions’ monumental costs, Brunswick could not                    
               expect to generate any profit and the transactions                     
               generated only unnecessary costs.  But petitioner never                
               considered any of the transactions’ economics because                  
               it was buying $200 million in phantom tax losses.                      
               We considered and rejected petitioner’s arguments that Saba            
          and Otrabanda engaged in the disputed CINS transactions to                  
          achieve nontax business purposes in Saba I.  Much of what we said           
          there is equally applicable in response to petitioner’s                     





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