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Relying upon certain partnership basis rules (i.e., sections
704(c), 743 and 754), the Ackerman group claimed to succeed to
Credit Lyonnais’s purported $1 billion tax basis in the
contributed SMHC indebtedness and purported $665 million tax
basis in the SMHC stock.4 In separate transactions in 1997 and
1998, SMP sold to TroMetro Films, LLC (TroMetro) portions of the
SMHC indebtedness for much less than the claimed basis. SMP also
formed another partnership, Corona Film Finance Fund, LLC
(Corona) and contributed to it part of the SMHC indebtedness.5
SMP then sold most of its ownership interest in Corona to
Imperial Credit Industries, Inc. (Imperial), for much less than
its claimed basis. On its partnership tax returns for 1997 and
1998, SMP claimed capital losses totaling, altogether, about $300
million from these various transactions. These claimed losses
passed through for the primary benefit of Mr. Ackerman.
Corona, meanwhile, sold to TroMetro the SMHC indebtedness
that SMP had contributed at Corona’s formation. On its
4 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the taxable years at
issue and, in certain references, as amended. All Rule
references are to the Tax Court Rules of Practice and Procedure.
5 In our findings of fact, we use terms such as
“indebtedness” or “contributions” only for convenience and not to
denote any legal significance.
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Last modified: May 25, 2011