-179-
amounts of unused NOLs. On the basis of all the evidence in the
record, we conclude that none of these assets had any significant
value. The EBD film library was a “broken” collection of B film
titles with missing physical elements, a fragmented chain-of-
title history, and limited or expiring distribution rights. The
banks had effectively tied up any value that SMHC might realize
on the Carolco securities. Use of the NOLs in SMHC was dependent
on avoiding an ownership change for purposes of section 382 and,
more importantly, was dependent on SMHC’s generating income,
which could not occur without new capital.
Whatever intangible value might have arisen from the banks’
participation in the enterprise is obviated by the parties’
prearrangement and the economic reality (just discussed) that the
banks would exit the partnership as soon as possible--which they
did, 20 days into their purported film business with the Ackerman
group. Thus, given the absence of appreciable value in the
contributed properties and the banks’ intentions of exiting the
partnership, the objective realities of the transaction compel
the conclusion that, apart from tax benefits, the Ackerman group
had no reasonable expectation of recouping the $10 million they
paid the banks as an inducement to enter into the partnering
transaction. Consequently, the economic realities lead us to
conclude that this $10 million amount was paid, not as an
inducement for entering into the partnership, but for the $1.7
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