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partially worthless, and whether the SMHC stock should be treated
as worthless.207
The May 12, 1997, memorandum appears to have been prepared
as part of an effort to secure an outside opinion letter or
advice with respect to the CDR transaction. Indeed, the letter
begins by stating: “At your request, we have prepared the
following responses to the requests for additional background
materials set forth in Donald Alexander’s memorandum to you,
dated April 9, 1997.”208 In this regard, the May 12, 1997,
memorandum from Shearman & Sterling has a distinct quality of
advocating Mr. Lerner’s position rather than providing advice
that might reasonably be relied upon in preparing SMP’s and
Corona’s 1997 and 1998 partnership tax returns.
The opinion itself deals primarily with the worthlessness
issue and concludes that the SMHC receivables and stock were not
207 Gerald Rokoff and Alvin Knott do not appear to have been
independent, “outside”, professional tax advisers, as petitioner
claims. Messrs. Rokoff and Knott represented the Ackerman group
in the CDR transaction and assisted Mr. Lerner in structuring the
partnership transactions at issue. Messrs. Rokoff and Knott
appear to have been actively involved in structuring transactions
for the Ackerman group’s subsequent exploitation of the acquired
built-in loss tax attributes, including as we explain below, the
“marketing” of the tax attributes to an outside “investor”.
208 Petitioner did not offer Donald Alexander’s memorandum
into evidence, and we have no basis for ascertaining its context.
There is no indication that Mr. Alexander (a former IRS
Commissioner) ever provided any favorable advice to petitioner
with respect to the proposed transaction or the issues discussed
in Shearman & Sterling’s memorandum.
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