- 46 -
Morever, none of respondent’s arguments that a decision on
the motion is either unwarranted or premature in the absence of
additional fact finding are persuasive.
Respondent argues that Mr. Winn’s continuing guaranties to
CB&T and to Federal Home Loan Mortgage Corporation, issued in
connection with the CB&T loans to Countryside and MP,25 and his
24(...continued)
was needed to provide funds for the AIG notes that were to
constitute the nontaxable distribution to Mr. Winn and Mr. Curtis
of their equity in the Manchester property, MP’s $3.4 million
borrowing, and Mr. Winn’s and Mr. Curtis’s assumption of
virtually all of the obligation to repay it by virtue of their
continuing ownership (through CLPP) of MP, served only to work a
reduction in the amount of money deemed distributed to them under
secs. 731(a) and 752(b) on account of the liquidating
distribution. Without that borrowing, and Mr. Winn’s and Mr.
Curtis’s subsequent assumption of almost all of the obligation to
repay it, they would have been deemed on account of the
liquidating distribution (and their concomitant relief from
Countryside’s liabilities) to have received distributions of
money from Countryside ($19,805,893 for Mr. Winn and $7,526,666
for Mr. Curtis) in excess of their respective bases in
Countryside ($17,600,747 for Mr. Winn and $6,923,414 for Mr.
Curtis). See apps. B and C. A gain would thus have been
recognized to each under sec. 731(a) ($2,205,146 for Mr. Winn and
$603,530 for Mr. Curtis). Apparently, in order to avoid that
gain, Mr. Winn and Mr. Curtis arranged with Countryside for a
distribution of encumbered property (in effect, almost $3.4
million of equally encumbered AIG notes), which reduced the
amount of money deemed distributed to them under secs. 731(a) and
752(b). While presumably a step taken for tax avoidance reasons,
it was part of a transaction that resulted in a change in the
form of Mr. Winn’s and Mr. Curtis’s investments (from limited
partners to interest-bearing note holders), which, for the
reasons stated herein, we view as imbued with economic substance.
Moreover, from Countryside’s standpoint, the $3.4 million
borrowing, at least in terms of cashflow, was not at all
“abusive” because the accrued interest (and, hence, the entire
interest detriment) with respect to that borrowing became the
indirect obligation of Mr. Winn and Mr. Curtis upon the
liquidating distribution. See apps. B and C.
25 In October 2000, Mr. Winn guaranteed Countryside’s
repayment to CB&T of a $3 million standby letter of credit with
(continued...)
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