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IN MB”, “B. TMD FAILED TO EXCHANGE ITS MB COMMON STOCK FOR STOCK
OF MB PARENT WORTH AT LEAST $1.1 BILLION”, and “C. AFTER THE
MERGER, POST-MERGER MB, THE SURVIVING CORPORATION FAILED TO HOLD
‘SUBSTANTIALLY ALL’ OF ITS PROPERTIES AND THE PROPERTIES OF THE
‘MERGED’ CORPORATION”. Under the last heading, the notice
elaborated:
D. TMD RECEIVED CONSIDERATION OTHER THAN VOTING
STOCK.
To qualify as a reorganization under Code section
368(a)(1)(B), only voting stock may be used by the
acquiring corporation. The merger of Bender Mergersub
into MB could not qualify as a “B” reorganization if
TMD received, in exchange for its MB common stock, any
consideration other than voting stock (“boot”).
In exchange for its MB common stock, TMD received
MB Parent common stock and constructively received the
rights to manage Eagle I, which it assigned to TM.
Immediately after the merger, Eagle I’s sole asset was
$1.375 billion in cash. The provisions of the Eagle I
LLC Agreement, coupled with the broad powers granted to
the manager, gave TM direct access to and control over
the $1.375 billion.
The rights to manage Eagle I were not voting
stock, had substantial value, and were constructively
received by TMD in exchange for its MB common stock.
Since TMD received boot in exchange for its interest in
MB, the merger of Bender Mergersub into MB failed to
qualify as a reorganization under Code section
368(a)(1)(B).
The notice also determined that section 269 applies to deny
nonrecognition treatment of the Bender transaction.
During trial of this case, the parties agreed that TMD’s
adjusted basis in its Bender common stock was $78,454,130 as of
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