-235-
preferred interests was guaranteed. 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 and economic incentive to do so.
Unlike the transactions in Turner Broadcasting Sys., Inc.
and Esmark Inc., the transaction with CDR was engaged in solely
to accomplish a reduction in taxes and did not involve the type
of legitimate tax choices that courts have traditionally upheld.
Unlike Turner Broadcasting Sys., Inc. and Esmark Inc., the
instant cases do not involve attempts by the Commissioner to add
steps that did not occur. Unlike the transactions in Turner
Broadcasting Sys., Inc. and Esmark Inc., the form of the CDR
transaction in the instant cases does not align with its
substance. Under the circumstances, we find respondent’s
proposed direct-sale recharacterization to be consistent with our
conclusion that the true substance of the transaction between the
Ackerman group and CDR was a transfer of built-in tax losses for
cash.
Petitioner claims, however, that there were legitimate
business reasons for structuring the transaction as a
contribution to a partnership for preferred interests.
Petitioner claims: “Viewed from the broader perspective, a
partnership structure was the only arrangement by which the stock
of Santa Monica Holdings Corporation, the obligor on two large
Page: Previous 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 NextLast modified: May 25, 2011