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merger). The assets listed on Schedule 3.3 were the EBD film
rights, the EBD development projects, the “City Lights” library
(except for 1 specific film), the “Wisdom” library, the “Moving
Pictures” library (except for 4 specified films), the “Five
Stones” library, and the “Vista Street” library.64
2. SMHC’s Dissolution
On December 10, 1999, SMHC was dissolved. SMP thereafter
became the owner of 1,070.6 shares of Troma common stock and 400
shares of Troma Series B convertible preferred stock.65
3. Tax Return Treatment of the Transaction
On its amended 1999 corporate income tax return, SMHC
reported that on December 10, 1999, a “C” reorganization took
place between SMHC and Troma whereby Troma acquired all of SMHC’s
assets solely in exchange for Troma voting stock (the C
reorganization).66 SMHC also reported that “Immediately prior to
the ‘C’ reorganization * * * [SMP], the sole shareholder made a
64 Schedule 3.3 included the film title “Mommy’s Epitaph”,
which was not a part of any of SMHC’s film libraries. It also
included a 22-film library that SMHC was to acquire for $485,000;
however, SMHC did not acquire this library. As a result, on
Sept. 2, 1999, SMHC and Troma amended the asset purchase
agreement with SMHC agreeing to contribute an additional $630,000
to Troma’s capital in lieu of the 22-film library.
65 Apparently, the stock certificates previously issued to
SMHC were marked “Void,” and new stock certificates were issued
to SMP.
66 On its amended 1999 partnership return, SMP reported that
the C reorganization between SMHC and Troma occurred on Sept. 2,
1999.
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