Santa Monica Pictures, LLC, Perry Lerner, Tax Matters Partner - Page 18

                                        -107-                                         
               In 1997 and again in 1998, SMP sold to TroMetro portions of            
          the $974 million in receivables that Generale Bank had                      
          contributed.  SMP reported a $147,486,000 loss on the sale of the           
          $150 million receivable in 1997 and a $80,190,418 loss on the               
          sale of the $81 million receivable in 1998.76  These losses                 
          flowed through to Somerville S Trust under the partnership tax              
          rules.  Also in 1997, Mr. Lerner negotiated a deal with Imperial,           
          wherein SMP contributed the $79 million receivable to a new                 
          limited liability company, Corona, which also elected partnership           
          tax treatment, and SMP then sold 79.2- and 14.65-percent                    
          membership interests in Corona to Imperial.77  The transactions             
          produced losses for SMP of $62,237,061, and $11,647,367,                    
          respectively, which flowed through to Somerville S Trust.  In               
          1997, Corona sold the $79 million receivable to TroMetro,                   
          generating a $78,768,955 loss, $74,671,378 of which flowed                  






               76 TroMetro paid $230,000 and gave a $2,284,000 note in                
          exchange for the $150 million receivable.  TroMetro paid $150,000           
          and gave a $1.25 million note in exchange for the $81 million               
          receivable.  TroMetro paid $397,166 principal and $159,880.35               
          interest on the $2,284,000 note.  No additional amounts were paid           
          on these notes.                                                             
               77 Imperial paid $212,000 cash and gave a $1.04 million note           
          for the 79.2-percent membership interest and paid $36,700 cash              
          and increased its note to $1,220,050 for the 14.65-percent                  
          membership interest.                                                        





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