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That language was consistent with Times Mirror’s tax objectives,
which were accepted by Reed when Reed concluded that it could not
acquire the Bender stock without agreeing to those terms. While
terms negotiated between the parties may produce evidence of
value, they are not conclusive. Cf. Berry Petroleum v.
Commissioner, 104 T.C. 584, 615 (1995), affd. without published
opinion on other issues 142 F.3d 442 (9th Cir. 1998). In the
instant case, the negotiated terms are overcome by the evidence,
as discussed above, that the MB Parent common stock did not have
a value of $1.375 billion or even 80 percent of that amount.
Once petitioner acknowledges and asserts that the MB Parent
common stock cannot be separated from the authority of Times
Mirror, the “ultimate claimholder”, to manage the cash in the
LLC, the putative 20-percent voting power of the common stock in
MB Parent and the bare title of MB Parent in the LLC should be
disregarded. MB Parent clearly serves no purpose and performs no
function apart from Times Mirror’s attempt to secure the desired
tax consequences. In this context, we agree with respondent’s
reliance on Frank Lyon Co. v. United States, 435 U.S. 561, 573
(1978), observing that “the simple expedient of drawing up
papers” is not controlling for tax purposes when “the objective
economic realties are to the contrary.”
As we indicated at the beginning of our factual analysis,
our understanding of the Bender transaction gives full effect to
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