Santa Monica Pictures, LLC, Perry Lerner, Tax Matters Partner - Page 69

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          recognized that the banks were committed as partners from the               
          time they signed the partnership documents.”  Petitioner’s                  
          argument might be construed to suggest that the banks’                      
          contributions to SMP and their receipt of preferred interests had           
          objective economic significance beyond petitioner’s asserted                
          business purpose for the transaction and the existence of the               
          Ackerman group’s tax considerations.  We disagree.  The banks’              
          tightly wrapped and virtually guaranteed exercise of their put              
          rights negates whatever economic significance might otherwise               
          have attached to the banks’ joining SMP.  The faint illusion of a           
          partnership interest cannot cloak the reality that the banks                
          planned, and had every economic incentive, to exit the                      
          partnership as expeditiously as possible.  In substance, the                
          Ackerman group paid the banks $10 million ($5 million as an up-             
          front “advisory fee” and $5 million upon the banks’ exercise of             
          their put rights) in exchange for the banks’ high-basis, low-               
          value receivables and SMHC stock so that the banks could                    
          “monetize”, and the Ackerman group could attempt to exploit, the            
          tax attributes associated with these assets.                                
                    a.  Advisory Fee and Put Price                                    
               All the various agreements between the Credit Lyonnais group           
          and the Ackerman group were tied to the side letter agreement,              
          the deposit account agreement, and the advisory fee deposit.  For           
          example, the side letter agreement provides that it shall become            






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