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Imperial’s engaging in the Corona transaction. Indeed, although
Imperial held substantial membership interests in Corona after
its purchases of SMP’s membership interests, Mr. Snavely did not
know whether Corona ever financed or acquired any films, did not
know of any specific business transactions in which Corona
engaged, and did not recall seeing any written business plan for
Corona. We conclude that the Corona transaction was undertaken
for the sole purpose of duplicating the built-in loss in the $79
million receivable through a sale of SMP’s membership interests
in Corona to Imperial and Corona’s sale of the $79 million
receivable to TroMetro. The evidence in the record establishes
that Mr. Lerner orchestrated this plan from the beginning and was
responsible for its implementation. We conclude that the Corona
transaction, similar to the transaction involving CDR, was devoid
of business purpose and economic substance and therefore cannot
be respected for Federal tax purposes.
VII. Sales of Receivables to TroMetro
Respondent also argues that substance over form principles
apply to recast the sales of the $150 million, $81 million, and
$79 million receivables to TroMetro as sales by SMP to TroMetro
of an option to receive an equity interest in SMHC or its
successor. In support of this argument, respondent relies on the
facts that: (1) Mr. van Merkensteijn wanted SMHC stock and not
the SMHC receivables; (2) Messrs. Lerner and van Merkensteijn had
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