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interests, followed by a sale of the preferred interests to Mr.
Ackerman’s entities. Because the only purpose for the
transaction was tax reduction, respondent argues, “Generale Bank
and CLIS should be disregarded as members of SMP and their
‘contributions’ to SMP followed by their ‘sale’ of the preferred
membership interests to Rockport should be recast as a direct
sale of the high basis/low value assets to Rockport for $10
million.”84
Petitioner insists that the form of the transaction in
question should be respected. Petitioner argues that there were
valid business reasons, apart from tax reasons, for the
transaction. Petitioner argues that the Ackerman group and the
banks entered into the transaction as part of a plan to partner
in a film distribution business. Petitioner contends that the
partnership form was chosen for valid business reasons, because
it was the only vehicle flexible enough to accommodate these
84 Respondent also argues that the so-called partnership
antiabuse regulation, sec. 1.701-2, Income Tax Regs., applies to
recast the banks’ contributions of the high-basis, low-value
receivables and SMHC stock as direct sales of those assets to
Rockport Capital (or its affiliate Somerville S Trust). In
general, the antiabuse regulation permits the Commissioner to
recast partnership transactions that make inappropriate use of
the partnership tax rules. Petitioner contends that the
antiabuse regulation is invalid. Because we decide these cases
utilizing existing judicial doctrines, we need not and do not
decide whether the partnership antiabuse regulation is valid or
whether it applies to any of the transactions in these cases.
Cf. Jade Trading, LLC v. United States, 60 Fed. Cl. 558, 562
(2004).
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