Santa Monica Pictures, LLC, Perry Lerner, Tax Matters Partner - Page 159

                                        -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  Next

Last modified: May 25, 2011