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capital contribution consisting of obligations of the company
having a face value and adjusted basis of $738,307,459.” SMHC
reported that “Subsequent to the asset transfer, * * * [SMHC]
liquidated and distributed the Troma Entertainment, Inc. stock
(which it received in exchange for its assets) to its sole
shareholder * * * [SMP].”
On its amended 1999 partnership return, SMP reported its
total basis in the Troma stock as $1,409,759,123.
4. Termination of the Distribution Agreements
On June 21, 2001, in connection with the SMHC and Troma
merger, TroMetro sent to Mr. Herz of Troma and Mr. Lerner of SMP
a letter confirming for SMP’s and Troma’s records: (1) The
consideration that was due and payable by TroMetro to SMHC
pursuant to the TroMetro distribution agreement for the period
December 23, 1997, to September 2, 1999, was waived; and (2) the
consideration receivable by TroMetro from Troma pursuant to the
Troma distribution agreement for the period December 23, 1997, to
September 2, 1999, was waived. In this letter, TroMetro asked
SMP and Troma to confirm for TroMetro’s records that: (1) The
agreement to the termination of the TroMetro and Troma
distribution agreements; and (2) the agreement to waive any
consideration due under those distribution agreements.67
67 Mr. Lerner signed this letter on June 21, 2001; Mr. Herz
signed it but did not date it.
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