-304-
Lerner testified that he relied on this memorandum with respect
to SMP’s 1997 partnership tax return.
Initially, we question whether Mr. Lerner ever received the
memorandum that Mr. Levinton prepared, let alone whether he
relied upon it with respect to SMP’s 1997 return. The memorandum
is not addressed to Mr. Lerner but is addressed to “File” and is
entitled “Inter Office Memorandum”. The memorandum is not an
opinion letter, and there is no indication that Mr. Levinton
prepared the memorandum intending that Mr. Lerner rely on it with
respect to SMP’s 1997 return. Although petitioner listed Mr.
Levinton as a potential witness in his pretrial memorandum,
petitioner did not call Mr. Levinton to testify.
In reaching his conclusions, Mr. Levinton relies on a number
of assumptions, including: (1) SMP was formed to exploit the
remaining film libraries owned directly by CLIS; (2) Generale
Bank and CLIS demanded the side letter agreement because of the
absence of a clearly defined exit strategy; and (3) after
Generale Bank and CLIS joined SMP as partners, the French
government, exercising its rights to regulate its banking
industry, determined that Generale Bank and CLIS should cease
their involvement in the movie business. Petitioner failed to
establish that any of these assumptions are accurate. The
evidence in the record indicates that SMP was formed to
facilitate the transfer of $1.7 billion of built-in losses from
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