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prepared by Howard Levinton of Grant Thornton, LLP; and (8) a
December 11, 1998, letter of opinion prepared by Joseph R.
Valentino of Chamberlain, Hrdlicka, White, Williams & Martin.202
We evaluate petitioner’s reliance on these purported opinions in
turn.203
1. August 1996 Memoranda From Shearman & Sterling
Sometime before August 27, 1996, Mr. Lerner hired the law
firm of Shearman & Sterling, LLP, in New York City, to assist the
Ackerman group in the CDR transaction. Mr. Lerner testified:
202 Petitioner also offered into evidence a Jan. 3, 1997,
memorandum from Messrs. Rokoff and Knott of Shearman & Sterling.
The memorandum discusses a proposed transaction involving SMP’s
transfer of high-basis assets to an existing corporation as part
of a sec. 351 contribution. The memorandum does not analyze or
discuss the transaction between the Ackerman group and CDR. In
fact, the memorandum states that “P’s current members acquired a
substantial portion of their interests in transactions unrelated
to that described in” the memorandum. Although the memorandum
analyzes whether an “ownership change” would occur under the sec.
382 rules, it does so in the context of the built-in loss rules
(not the rules regarding NOL carryovers). The proposed
transaction apparently did not occur, and we cannot agree that
any reasonable person, let alone a sophisticated tax attorney
like Mr. Lerner, would place any reliance on it in determining
the proper treatment of the CDR transaction. In any event, Mr.
Lerner testified that he relied on this memorandum in preparing
SMHC’s corporate tax return and not in preparing SMP’s and
Corona’s 1997 and 1998 partnership tax returns.
203 Petitioner listed James Rhodes, Howard Levinton, Gerald
Rokoff, and Alvin Knott as witnesses in his pretrial memorandum.
Petitioner called none of these witnesses to testify at trial.
Instead, petitioner relies solely on his own testimony and the
various documents to establish his reasonable cause position.
The law firm of Chamberlain, Hrdlicka, White, Williams & Martin
represented petitioner in these cases. Joseph R. Valentino did
not testify.
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