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Petitioner emphasizes the formalities of the multicorporate
structure, which undeniably was intended and carefully designed
to comply with the requirements for a tax-free reorganization
under section 368. Petitioner asserts that “respondent
erroneously substitutes his version of the Bender transaction for
what actually transpired.”
Respondent does not deny that there was a business purpose
for the Bender transaction, i.e., the desire of Times Mirror to
get out of the legal publishing business because of the trends in
that market. Pointing to specific aspects and results of the
transaction, however, respondent argues:
All of the unusual features of the Bender
Transaction structure, the creation of a dormant
intermediary company (MB Parent) and an enslaved LLC
(Eagle I), the interlocking tiers of redeemable Bender
and MB Parent voting preferred stock that transferred
virtually complete control over Bender to Reed, and the
provisions of the LLC Agreement, that transferred
absolute control over the cash to the manager (TM),
were united to a single purpose: segregate and seal
off TM’s interest in the cash and Reed’s interest in
Bender, one from the other.
The substance of the Bender Transaction is a swap.
TM gave up Bender for the right to control and
distribute to itself at will $1.375 billion of cash.
Reed gave up $1.375 billion of cash for ownership and
control of Bender. This is hardly the kind of
readjustment of continuing interests in property under
modified corporate form that marks a real
reorganization. * * *
The proposed findings of fact set forth in the briefs of the
parties cannot be adopted as our findings because they lack
objectivity either by omission or in argumentative descriptions.
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