-216-
6. Conclusion
We conclude that SMHC’s assets (the EBD film library, the
Carolco securities, and the unused NOLs) had no significant value
as of the date the banks made their “contributions” of SMHC
receivables and stock to SMP.161 Consequently, without an
infusion of new capital, SMHC had no realistic income-generating
capacity to create value in the SMHC receivables and stock.
Given the absence of appreciable value in the contributed
properties and the banks’ intentions of exiting the partnership,
we are not convinced that the Ackerman group entered into the
transaction with any realistic expectation of realizing any
economic return on the approximately $10 million that they had
paid the banks as an inducement to enter the transaction.
Instead, the Ackerman group incurred this $10 million “cost” not
as part of a real-world economic investment but in the hopes of
reaping enormous tax benefits and fees from the banks’ built-in
losses. 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 billion in tax
attributes that the Ackerman group acquired in the transaction.
161 SMHC’s draft consolidated balance sheets for the period
ended Dec. 10, 1996, showed SMHC’s only assets to consist of
property and equipment in the amount of $69,000. Similarly,
SMHC’s tax return for the period ended Dec. 31, 1996, showed that
its assets then totaled $69,113.
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