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Ackerman group enormous tax attributes associated with the banks’
high-basis, low-value receivables and SMHC stock. To that end,
the banks purported to join SMP as partners, contributing these
receivables and stock.
To transfer the tax attributes, however, the banks had to do
more than enter into the partnership; they also had to exit the
partnership, leaving their receivables behind. And so they did,
as soon as possible, by “putting” their partnership interests to
one of the Ackerman group members. In essence, then, the parties
purposed that the banks should join the partnership so as to
withdraw from it. It is this schizophrenic purpose which
“defeats or contradicts the apparent transaction”. Chisholm v.
Commissioner, 79 F.2d at 15.
We conclude that, in substance, the banks did not become
partners of SMP; rather, they transferred their high-basis, low-
value receivables and SMHC stock, along with whatever associated
tax attributes might survive the transfer, to the Ackerman group
for $10 million. In the following discussion, we describe in
detail the basis for our conclusions, focusing on the purposes
and economic realities of the transactions in question.
D. Subjective Business Purpose
Under the first factor of the economic substance doctrine,
subjective business purpose, we must determine whether there was
a business purpose for engaging in the transaction other than tax
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