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partnership structure, and outlines the anticipated tax
consequences to the parties. It states: “In each proposed
structure, we believe that neither party should recognize current
gain or loss and that GCo, through the entity conducting the
joint venture, should effectively receive a carryover tax basis
in the assets of the joint venture.”
The memorandum begins with a short “BACKGROUND” section that
describes the New MGM transaction and the transaction with CDR.
Shearman & Sterling reiterates its erroneous factual assumptions
(almost verbatim) from its May 12, 1997, memorandum; i.e., that
SMHC retained extensive film rights and properties, including the
65 EBD film titles, which had a present value of $29 million and
a future value in excess of $35 million and that SMP was actively
pursuing its rights to maximize its recovery of its investment in
the Carolco securities, which had been valued at approximately
$11 million.
The memorandum proposes a section 351 transaction similar to
the transactions hypothesized in Shearman & Sterling’s August
1996 memoranda. The memorandum discusses similar legal issues
and reaches similar conclusions as in the other memoranda. The
memorandum also proposes a partnership transaction in which GCo
acquires 45 percent of the preferred interests and 45 percent of
the common interests in the partnership from the Ackerman group
for cash. Under the proposed transaction, GCo would receive an
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