-221-
As part of this deal, Imperial would enter into a tax-sharing
agreement providing for a payment for the benefits attributable
to this loss.
Although Imperial approved this deal, Mr. Lerner got nervous
and proposed an alternative tax deal in which SMP would form a
new limited liability company, Corona, by contributing the $79
million receivable. Imperial would purchase a substantial
portion of SMP’s membership interest and would receive a smaller,
but still significant, tax-loss allocation on Corona’s sale of
the high-basis $79 million receivable. In exchange for the tax
losses, Imperial would “contribute” back to Corona 20 percent of
the tax losses that it received; i.e., $14,595,652. SMP received
this purported contribution as a fee for the tax losses.165 At
the end of the day, the Ackerman group and Imperial had
effectively duplicated the built-in loss that was inherent in the
$79 million receivable with both the contributor (SMP) and the
transferee partner (Imperial) receiving tax-loss allocations:
SMP realized $62,237,061 and $11,647,367 losses, respectively, on
the sales of portions of its Corona membership interest; Imperial
realized a $74,671,378 loss (and SMP realized a $4,097,577 loss)
on the sale of the $79 million receivable.
165 Mr. Lerner testified that SMP would receive “A very large
payment” for the tax losses, roughly “$15 million.”
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