-21-
On February 10, 1997, Mr. Sweeney sent a memorandum to
Kathleen E. Lee, another attorney at his firm, asking her to
research certain issues with respect to the potential business
trust transaction. He also summarized therein as follows:
The present concept that is being considered is
that Porter would put up $40 million of his portfolio,
and between trusts 2064 and 3044-5, 3044-6 and 3044-8,
the Wilmington Trust Company would put up approximately
$42 million. The net effect would be that Porter’s
funded revocable trust would then have a minority
interest in the business trust, and possibly at
Porter’s death, we could obtain both lack of
marketability and minority interest discounts with
respect to Porter’s interest in the Delaware business
trust.
He further noted: “it is anticipated that Porter Schutt will at
some time in the not too distant future after the transaction is
implemented commence to give away to his children in the form of
taxable gifts interests in the Delaware business trust.”
Ms. Lee responded to the following four questions by
memorandum dated March 5, 1997:
1. If our client and the Wilmington Trust
Company contribute investment portfolios consisting of
marketable securities into a Delaware Business Trust,
would such contributions give rise to investment
company status under � 721(b) of the Internal Revenue
Code of 1986, as amended (the “Code”) such that a
realization of gain must be recognized upon the
creation of the Delaware Business Trust?
2. Can the Delaware Business Trust make an
election under � 754 of the Code to increase basis in
the underlying assets of the Delaware Business Trust?
3. How should the Delaware Business Trust be
structured so that the entity will continue after the
death of our client?
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