Santa Monica Pictures, LLC, Perry Lerner, Tax Matters Partner - Page 325

                                       - 92 -                                         
          (the $1,024,000 TroMetro note).63  On December 10, 1998, TroMetro           
          paid $205,191 principal and $82,600 interest on the $1,024,000              
          TroMetro note.  No other cash payments were made on the                     
          $1,024,000 Trometro note.                                                   
               On its partnership tax return for the period December 16 to            
          31, 1997, Corona reported a $78,768,955 long-term capital loss on           
          the sale of the $79 million receivable.  In computing this loss,            
          Corona reported a $1,144,000 sale price and $79,912,955 basis for           
          the $79 million receivable.  The loss flowed through to Imperial            
          in the amount of $74,671,378 and to SMP in the amount of                    
          $4,097,577.  SMP’s $4,097,577 loss then flowed through to                   
          Somerville S Trust and finally through to Mr. Ackerman.  On                 
          Schedules K-1 attached to its return, Corona reported the sale of           
          the $79 million receivable as a $74,671,378 decrease in                     
          Imperial’s capital account and a $4,097,577 decrease in SMP’s               
          capital account.                                                            
               6.  Imperial’s Capital Contribution                                    
               On January 15, 1998, Corona’s members executed a second                
          amendment to the amended and restated Corona LLC agreement,                 
          providing that “At the end of any year in which there are                   

               63 At some point, Mr. van Merkensteijn, on behalf of                   
          TroMetro, executed a second promissory note also dated Dec. 29,             
          1997, in the amount of $1.180 million (the $1.180 million                   
          TroMetro note).  Mr. van Merkensteijn testified that the first              
          note was corrected to reflect a different amount.  The $1,024,000           
          TroMetro note in the record has the handwritten notation                    
          “Cancelled” on its first and last pages.                                    





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