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that the Ackerman group entered into the transaction solely to
exploit the banks’ built-in losses using section 704(c). The
parties did not intend to partner in any film business; the
parties had a prearranged understanding that the banks would
exercise their put rights and immediately exit the partnership.
Petitioner cannot rely on Shearman & Sterling’s “advice”, which
unreasonably assumes a different purpose for the transaction and
its structure. Sec. 1.6664-4(c)(1)(ii), Income Tax Regs.
Shearman & Sterling’s May 12, 1997, memorandum was not
prepared in connection with the filing of SMP’s and Corona’s 1997
or 1998 partnership tax returns. Further, Mr. Lerner testified
only that he relied on that memorandum in preparing SMHC’s 1997
corporate tax return. He did not testify that he relied on the
memorandum to prepare SMP’s and Corona’s returns. In any event,
we conclude that any such reliance would have been unreasonable.
4. October 10, 1997, Shearman & Sterling Memorandum
Gerald Rokoff and Alvin Knott of Shearman & Sterling
prepared another memorandum dated October 10, 1997. The
memorandum purports to summarize the anticipated tax consequences
of a proposed joint venture between the Ackerman group and “GCo”,
a U.S. corporation.210 The memorandum proposes two hypothetical
structures for this joint venture, a corporate structure and a
210 The memorandum does not identify “GCo” but acknowledges
that Crown Capital might deliver the memorandum to “GCo” in the
course of discussions.
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