Santa Monica Pictures, LLC, Perry Lerner, Tax Matters Partner - Page 185

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          respondent has met his burden of proof on this issue.179  Because           
          we decide, on alternative grounds, that SMP obtained no bases in            
          the SMHC receivables, this conclusion does not ultimately affect            
          our decision.                                                               
          VIII. Summary of Conclusions So Far                                         
               We conclude that the banks’ contribution of the SMHC                   
          receivables to SMP lacked economic substance and cannot be                  
          respected for Federal tax purposes.  We also conclude that SMP              
          obtained no basis in the SMHC receivables under section 723                 
          (because the receivables were worthless) or in the $79 million              
          receivable (because that debt did not represent bona fide                   
          indebtedness when it was assumed by MGM Group Holdings).  In                
          addition, we conclude that the Corona transaction lacked economic           
          substance and likewise cannot be respected for Federal tax                  
          purposes.  For these reasons, we conclude:  (1) SMP had no basis            
          in the $150 million receivable and the $81 million receivable               
          when those receivables were sold to TroMetro in 1997 and 1998;              
          (2) SMP had no basis in the $79 million receivable when it                  
          contributed that receivable to Corona in 1997, and SMP’s basis in           
          its Corona membership interest under section 722 was limited to             
          the $250,000 cash contribution that it made to Corona; and (3)              
          Corona obtained no basis from SMP under section 723 in the $79              

               179 Respondent’s argument was raised as new matter in the              
          amendment to answer.  Consequently, respondent bears the burden             
          of proof as to this issue.  Rule 142(a).                                    





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