-234-
transferring their built-in tax losses to the Ackerman group for
cash. Although the banks were not legally obligated to exercise
their put rights, there was an understanding that they would do
so. The banks had every intention of exercising those rights and
no economic incentive to stay in SMP.
We also find the instant cases distinguishable from Esmark
Inc. & Affiliated Cos. v. Commissioner, supra, and Turner Broad.
Sys., Inc. & Subs. v. Commissioner, supra. In Esmark Inc., we
determined that a tender offer and redemption were part of an
overall plan and a prearranged understanding between Mobil and
the taxpayer. Nonetheless, the taxpayer, which was a publicly
held company, could in no way bind its shareholders to an
agreement to sell their shares, and each shareholder
independently decided to sell or retain the taxpayer’s stock.
The shareholders were not a part of the understanding between
Mobil and the taxpayer. Thus, the existence of the shareholders
gave the individual steps in the multi-step transaction
independent significance; Mobil’s acquisition of the taxpayer’s
shares was not a foregone conclusion. By contrast, in the
instant cases, there were no independent parties that might upset
the planned transactions. Pursuant to the side letter agreement,
Rockport Capital was bound to purchase the banks’ preferred
interests on the exercise of their put rights. Pursuant to the
deposit account agreement, the $5 million put price for the
Page: Previous 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 NextLast modified: May 25, 2011