TAX COURT OPINION

Case: Cox Enterprises, Inc. and Subsidiaries
Docket Number: 18312-06
Judge: Halpern
Opinion Type: memo
Filed: 06/09/2009
Pages: 48

T .C . Memo . 2009- 34 UNITED STATES TAX COUR T COX ENTERPRISES, INC . & SUBSIDI IES, Petitioner v_ . COMMISSIONER OF INTERNAL REV NUE, Respondent : Docket No . 18312-06 . Filed June 9, 2004 . C and A were either the sole or controlling j j trustees of three trusts (the shareholder trusts) whose corpora, together, . consisted exclusively of 98 percen t of P .'s stock . C and A were the i come beneficiaries of each trust for life, the remainder (corpus) to be divided among their lineal descen nts upon the deat h of the survivor . In 1992, P tried to'sell two TV stations but wasjl able to sell only one . For valid b usiness reasons, Pf decided to . operate the retained station, KTVU (TV), in partnership with two family partnerships whose members' ; were C, A, their children, and entities they ► ; +i controlled . . In 1993, to that end, KTVU, Inc ., a wholl y owned second-tier subsidiary of P that owned and operated KTVU (TV), contributed the KTVU (TV) station 11 1 assets (station assets) to the-newly formed KTV U Partnership in exchange for a majority partnershi p interest . The two family partnerships contributed cash in exchange for their .minority interests . In 1996, the family partnerships made addition 1 cash contributions to correct an inadvertent shortfall identified by an independent consulting firm . ' - 2 - R alleges that, because KTVU, Inc .'s partnership interest in KTVU Partnership was worth $60 .5 million less than the station assets it contributed to KTVU Partnership, KTVU, Inc ., gratuitously transferred valuable partnership interests to the family partnerships . R argues that, because of (1) the identity of interests between .the beneficiaries of the shareholder trusts and the members of the family partnerships and,(2) the effective control by C and A over the corporate actions of .P and its subsidiary, KTVU, Inc ., that transfer was made for the benefit of the shareholder trusts, resulting in a constructive dividend distribution of appreciated property by P to the shareholder tfrusts .taxabe to P under sec . 311(b), I .R .C . P moves for summary judgment . P admits, for purposes of the motion, a $60 .5 million disparity between the value of the station assets KTVU, Inc ., contributed to KTVU Partnership and the value of the partnership interest it received in return . Held : Because the undisputed facts establish that it was not the primary purpose of the assumed gratuitous transfer of partnership interests to the family partnerships to provide an economic benefit 'to them and, derivatively, to the shareholder trusts, that assumed transfer (which, under the agreed facts, we . find to-have been unintentional and not beneficial to the shareholder trusts) did not constitute a constructive dividend from Pto the shareholder trusts resulting in taxable gain to ;~P under sec . 311(b), I .R .C . See Stinnett's Pontiac Serv ., Inc . V . Commissioner , 730' F .2d 634, 640-641 (11th Cir . 1984), affg . T .C . Memo . ;1982-314 ; Sammons v . Commissioner , 472 F .2d 449, 451-454! (5th Cir . 1972), affg .. in part, revg . in part, and remanding T .C . Memo . 1971-145 . Judith A . Mather , Bernard J . Long , Jr . , and Alejandro L . Bertoldo , for petitioner . Bonnie L . Cameron , for respondent. . f - 3 - MEMORANDUM OPINION HALPERN, Judge : Petitioner is th common parent of a n affiliated group of corporations makin a consolidated return o f income . By notice of deficiency (the notice), responden t determined deficiencies in the group ' s Federal income tax for its 1992, 1993 , 1994, and 1996 taxable (calendar) years . Petitione r timely filed a petition disputing a po tion of the proposed' $24,839,810 deficiency for 1993 . Petitioner has moved for ; summary judgment (the motion) .', Respondent objects . The issu e for decision is whether a member of th group (petitioner's, ' wholly owned second-tier subsidiary) must recognize gain under f section 311(b)2 in connection with its transfer of assets to a newly formed partnership in exchange for an interest in tha t partnership . The motion asks that we enter judgment i n petitioner's favor "finding as a matte of law that, contrary t o [the notice], petitioner need no recognize gain under section 311(b) * * * in the amount of $ 56,182,115, or in any , other amount, upon the formation * * * [of the partnership] . 1 Petitioner assigned no error to of deficiencies for 1992, 1994, and 199 portion of the deficiency respondent de resolution of the motion in petitioner' dispute but leaves an undetermined def' order the-parties to submit their sepa joint computation of the remaining def ' espondent's determination 6, and it disputes only a termined for 1993 . Our s favor disposes of it rhat ciency for 1993 . We shall ate computations or'a ciency for that year . 2 Unless otherwise noted, all sect on references are tolith e 3 and all Rule references and Procedure . The notice he parties agree (and!we to sec . 311(b) . Internal Revenue Code . in effect for 199 are(cid:127)to .the Tax Court Rules of Practice refers to gain under sec . 311(d), but accept) that the intended reference is - 4 Background Summary Judgment A summary judgment is appropriate "if the pleadings, answer s interrogatories, depositions,, admissions, and any othe r acceptable materials , together with the affidavits ; if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law ." Rule 121(b) . In 4 I~ response to a motion for summary judgment, "an adverse party ma y not rest upon the mere allegations or denials-of such party' s pleading, but such party's response, by affidavits or as otherwise provide d in this Rule, must set forth specific facts showing that there is'a genuine issue for trial ." Rule 121(d ) Fact s on Which We Rely Petitioner is a Delaware corporation with its principa l offices in Atlanta, Georgia . Petitioner is primarily engaged, through subsidiaries, in newspaper publishing and the ownershi p and operation of cable television systems, radio and televisio n broadcasting stations, and wholesale and retail automobile auctions and related businesses . At all times relevant'to th e motion, Cox Communications, Inc . 1(CCI), a wholly owned subsidiary of petitioner, owned KTVU, Inc ., which, until September 1, 1993, owned and operated station KTVU (TV), serving the Sa n Francisco/Oakland, California, market . a jI At all times relevant to the motion, petitioner's principa l shareholders were three trusts (together, the shareholder trusts) formed by the former governor of Ohio, James M . Cox (Mr . Cox) , 5 which collectively owned approximately 98 percent of petitioner's issued and outstanding stock . Two of hose trusts (the Atlant a trusts) were established in 1941, one Atlanta Trust I) for the benefit of Mr . Cox's daughter, Anne Co Chambers (Mrs . Chambers) ; as income. beneficiary for life, and hei lineal descendants! , as holders of the remainder interest, and the-other (Atlanta Trust II) for the benefit of Mr . Cox' s daughter, Barbara Cox 'Anthony (Mrs . Anthony), as income beneficiary or life, and her lineal descendants, as holders of the remainder interest . The third trust (the Dayton trust), established in 1943 and modified .iln 19.84, benefited both daughters, as inc me beneficiaries for ife, and their lineal descendants, as succe sor .income beneficiarie s and holders of remainder interest . At all times relevant tdithe motion, 'Mrs . Anthony was the trustee o Atlanta Trust I, Mrs . Chambers was the trustee of Atlanta Tr three cotrustees of .the Dayton trust ..3 st II, and each was' oppI a of At all times relevant t o the motion, each Atlanta trust owned a, proximately 29 percent, and the Dayton trust owned approximate y 40 percent, of petitioner's stock . The balance of pe itioner's stock was', Yield by other parties, principally petition whom were members of the Cox family . r 's employees , none'o f, ~ 3 Although the three trust instrum record in this case, they are before ti arising out of the same transaction, CY docket Nos . 16698-06 and 16699-06, and, been described by both parties in their the .motion . There appears to be no di : the instruments, and, therefore, we shE terms . See Fed . R % Evid . 201 . . N~ ants are not part of the e Court in a related case ambers v . Commissioner , in various parts, hate filings with respect to pute as to the terms :of 11 take notice of thos e . ,I At all times relevant to'the motion, Mrs . Chambers and Mrs . Anthony were members of petitioner's eight-member board of directors (the board) and Mrs .- Anthony's son, James CoxiKennedy, was chairman of the board and petitioner's chief executiv e officer (CEO) and president . ii By agreement dated August 1, :1993, Mrs . Chambers's„thre e children and an entity Mrs . .Chamber s wholly owned formed AC C Family . Partnershi p (AC C Partnership) . The three children wer e limited partners, and ;; each owned a 31 .66-percent interest in AC C Partnership . By,agreements dated August 1, 1993, Mrs . Anthony, her two children and/or entities (corporations and trusts) they' :owned or . controlled formed two partnerships . By September 1, 1993, the two partnerships merged and became the Anthony Family Partnership (BCA(cid:127)P .artnership) . BCA Partnership was a general partnership of {which KTVU-BCA, Inc .,-an entity wholly owned by Mrs . Anthony , owned approximately 4 percent andfentities (corporations an d trusts, including trusts for Mrs . Anthony's grandchildren) .owned or .controlled by Mrs . Anthony's children owned approximately 96 percent . One of the stated purposes for the formation of ACC Partnership and the two partnerships that became BCA Partnership was to "invest in interests in the KTVU Partnership - 7 - On August 1, 1993, KTVU,, Inc ., ACC Partnership, and the!tw o family partnerships that, by September 1, 1993, had merged tb become BCA Partnership formed KTVU Partnership . KTVU ..Partne ship was formed to acquire and operate tele ision station KTVU ;(TV) . During 1993, petitioner's shareholders did not include ACC , Partnership, BCA Partnership (together,) the family partnershlips ) or any of .their respective partners . diagram showing th'e' relationships of the various trusts, c rporations, and partnerships that we have described ( arid certain information yet to be described) is attached to this report as an appendix;. _ I 6 Pursuant to the terms of the KTVU Partnership agreemen KTVU, Inc ., became the managing general partner and receive0 a majority partnership interest, which entitled it to 55 percent of partnership distributable profits and liquidation proceeds up to specified base amounts and 75_percent(cid:127) f distributable profits and liquidation proceeds in excess of hose, base amounts .-i CC Partnership and BCA Partnership each received a 22 .5-percent- interest in distributable profits and iquidation proceeds p to the same specified base amounts and a 2 .5-percent interesIIt i n distributable profits and liquidation ~roceeds in excess of thos e base amounts .4 The KTVU Partnership agreement also contains the following subparagraph relating to "Tax Allocations" : The profit interest BCA Partners ip received from KTVU Partnership represents the sum of the profit interests received by the two partnerships that merged to create BCA Partnership . - 8 - 4 .6 Tax Allocations : Code Section 704(c) . (a) In accordance with)Code :section 704(c) and the Treasury Regulations thereunder, . income, gain, loss, and .deduction with respect to any property contributed to the capital of the Partnership shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its initial Gross Asset Value . The "initial Gross Asset Value of . any asset contributed by a Partner .to the Partnership" is defined as "the gross fair market .. value ..of such asset , as determined by the contributing Partne r and the Partnership" . On, August 6, 1993, the executive committee of petitioner's boardi,,,which was composed of James Cox Kennedy (petitioner's CEO and president) and two nonfamily,)~outside directors (th e executive committee), adopted a resolution on behalf of petitioner, which provided, in pertinent part, as follows : RESOLVED, . That the Company hereby ratifies an d approves the formation by KTVU, Inc ., a wholly owned subsidiary of the Company, and certain general and!,, limited partnerships to be formed by Anne . Cox Chambers, Barbara Cox Anthony and James C . Kennedy, and the 'children of such individuals (the "Family -Partnerships"), of a new general partnership to bel known as "KTVU :Partnership," to operate Television Station KTVU, San Francisco, :California, and to conduct the business presently conducted by KTVU, Inc ., and that in consideration of the-partnership interests to be acquired by KTVU, Inc . and the Family Partnerships, KTVU, Inc . . shall,:contribute substantially all of its assets used in the conduct of Television Station KTVU and the Family Partnerships shall contribute cash in an amount corresponding to the fair market value of the partnership interests acquired by such Family Partnerships ; and i - 9 .- RESOLVED , . That the proper of shall determine the final valuati Partnership and the percentage in held by each of the Partners then contributions being made by each the formation of the KTVU Partner acquisition of the interests then Partnerships shall be on terms an favorable to the Company or-KTVU , and conditions that would apply i a similar transaction with persons who are of affiliated with' the Company * * * . icers of the Company n of the KTVU erest therein tobe!' in based on the i . f them to insure thaat hip and the in .by the Family conditions no less ' Inc . than the terms) q On September 1, 1993, KTVU, Inc ., contributed to KTVU Partnership the assets of KTVU ( TV), excluding approximately $25 'million of KTVU, Inc .'s working. capita , its interest in Sutro Tower, Inc . (the corporation owning th transmission tower th e television station used ), its interest in the San Francisco,J~ Giants Baseball Club, and its studio b ilding ( the contributed assets are hereafter -referred to as the station assets)- . Oni the same day, ACC Partnership and BCA Partnership each contributed $27-million to KTVU Partnership . 5 That amount was based , in part, on an analysis by Arthur Andersen L .L .P . (Arthur Andersen) o f 11 "the appropriate marketability and minority interest discounts applicable to a minority interest in the KTVU Partnership asl'of August 1, 1993 .11 The family partnerships' contributions to KTVU Partnership were financed by loans to the family partners h ips by, Texas Commerce Bank, N .A ., and secured ,lin part, by eac h partnership' s interest in KTVU Partnership . Mrs . Chambers, and her three children guaranteed the loan to ACC Partnership, an d C s BCA Partnership ' s contribution t represents the sum of the contributions partnerships that merged to create BCA KTVU Partnership made by the two artnership . - 10 - Mrs . Anthony and her two children guaranteed the loan to BC A Partnership . In 1996, petitioner's management discovered that errors had been made in computing the fair market value of each family partnership's interestE in KTVU Partnership . The computations failed to take into account (1) the family partnerships'~l cas h contributions totaling $54 million and (2) the reduced allocation to the family partnerships (and increased allocation to KTVU , Inc .), ..of income distributions and sale proceeds in excess of th e base amounts specified in the KTVU Partnership agreement . Thereafter, petitioner (with the concurrence of the family partnerships) engaged the investment banking firm of Furman Selz, L .L .C . (Furman Selz), to determine, in the light of those computational errors, whether there should be an adjustment t o thesamounts the family partnerships contributed in exchange for their interests in KTVU Partnership . On June 30, 1996, Furman 'Selz, in its formal analysis, opined that, as of August 1, 1993, 'f II each family partnership's interest in KTVU Partnership had a fair market value of approximately $31 million . On September 12 , 1996, in response to that analysis, each family partnership contributed an additional $4 million to KTVU Partnership .6 Petitioner's decision to continue operating KTVU (TV ) II il d - dl through KTVU Partnership resulted from its inability to,implement its decision to have KTVU, Inc ., sell . the station . Early i n 6 We have not been provided with the computations that led Furman Selz to conclude that thei~family partnerships had initially undercontributed .to the partnerships . 11 1992, petitioner engaged McKinsey & Co . .(McKinsey ) to evaluate(cid:127) the prospects of several of its operating divisions , including its television broadcast business . Mc insey recommended that petitioner retain its stations affiliated with the then major television networks , but .that it dispose of its two Fox, affiliates ,. KTVU ( TV) and WKBD (TV), the latter serving the Detroit, Michigan , 'area . Later in 1992 , petitioner engaged Morgan Stanley & Co . (Morgan Stanley ) to assist in the sale 'Of both stations . Morgan Stanley ' s efforts resulted in limited expressions of interest . in acquiring the two stations ; and, although petitioner was eventually able to sell WKBD (TV), a rapidly declining market during the fourth quarter of 1992 ': caused petitioner to terminate efforts to solicit offers for KTVUI( TV) . Operating that station through KTVU Partnership provided aiv iable business alternative to a sale of the s ation in'that it (i) I responded , in part, to McKinsey ' s recom endation that petitioner I reduce its investment in the television broadcast business ;' 1(2 ) made KTVU , Inc .'s working capital avail ble for use in nonbroadcast areas of petitioner's busi ess , and (3 ) helped to allay concerns among petitioner's televsion broadcast executives that petitioner was forsaking the telev i sion business by We assume that the accomplishment of this objective 'wa's made possible , at least in part, by the family partnerships ' initial $54 million investment in KTVU artnership . (cid:127) I demonstrating the Cox family's continuing commitment to„that - 1 2 business . e Respondent's Notice -of Def iciency ~ In 1999, in connection with his examination of petitioner' s 1993 return, respondent engaged Business Valuation Services, Inc . ,(BVS), to opine as to' ;;the fair market value of (1) the station assets (2) KTVU, Inc .'rs partnership interest in KTVU Partnership , and (3 ), the family partnerships' interests in that partnership . (cid:127) BVS arrived at a $300, ; million fair market value for the'station assets, a $233 .5 . million fair market value for KTVU, Inc .' s partnership interest in_KTVU Partnership, and a $34, .342,,500-fair market value for each family partnership's interest in KTVU Partnership, all as of August 1, 1!1 993 . Respondent subsequently increased the latter two values to $239 .5 million and $34,912,50 0 take ;into account the family partnerships' additional 199 6 cash contributions .. The foregoing adjusted values give rise to (1) a $60 .5 million difference between the determined fair market value of the contributed station assets and the determined fair- market value of KTVU,,Inc .'s partnership interest in KTVU !Partnership and (2) a$7,825,000 difference between the . In his objection to the motion,,, respondent does not dispute petitioner's representations regarding the foregoing rnontax motives for the formation of KTVU Partnership . Therefore, we treat those representations as true . See Rule 121(d) ; Jarvis v l udgment to the Commissioner where the taxpayer "failed,to submit any information which contradicts * *,'* [the Commissioner's] factual determinations") ; see also Beauregard v . Olson, '184 F .3d 1402, 1403 n .1 (11th Cir . 1996) (accepting as true undisputed !'facts submitted in connection with a motion for summar y ]judgment) . 78 T . C . 646, 658-659 (1982) (granting summar y j~ a~ determined value of the two family par nership interests in KTVU Partnership and the $62 million those artnerships contributed . 13 - On the basis of the first of thos two differ ences , respondent included in the notice . the ollowing .adjustmenti~to petitioner's 1993 income under section 311(b) : 9 Other .Income-Gain under IRC 311 d [sic] : { It is determined that you have s [sic] of the under Section 311(d) related to property you distribut shareholders during the taxable y taxable gain is $56,182,115 figur Fair market value of KTVU, Inc . station asset s .Less fair market value of KTVU, 55o interest received Fair market value in excess of interest received (gain) Less KTVU, Inc . basis in excess of fair market value (1 ) -Section 311(d) [sic] gain $300,000,000 . 239, .500,00 0 $ 60,500,000 4,317,885 $56,182,11 5 9 Sec . 311(b) provides, in .pertine .t part, as follows : SEC . 311 (b) . Distributions Of Appreciated Property .-- (1) In general .--If-- (A) a corporation d istributes property (other than an such corporation) to a s distribution to which su 301-307] applies, and bligation of areholder in a part A [secs . (B) the fair market property exceeds its.adj hands of the distributi n value of such I' sted basis (in the . corporation) , then gain shall be recognized corporation as if such proper distributee at its fair marke to the distributingiy were sold to the" value . F i i - 14 - Therefore, your taxable income is increased $56,182,115 for the taxable year 1993 . Petitioner is willing to--assume for purposes'of the' motio n that the value of the ; partnership : interest KTVU, Inc ., received upon formation of KTVU Partnership was $239 .5 million and tha t that value was $60 .5 million less than--the value .of KTVU, Inc .'s icontribution,to that partnership 1,($30 .0 million) . f lif Discussion I . Arguments of the Parties A . Respondent E .In -..his "Notice of Objection to * * * [the motion) ", if respondent summarizes his position as follows : Petitioner, "while under the direction and control of the trustees of Atlanta Trust I, the Atlanta Trust ;II, and the Dayton Trust ("Shareholder Trusts"),, dG entered into a transaction with its subsidiary, KTVU, :Inc ., to distribute partnership interests to the ;partners of KTVU''Partnership . To the extent KTVU, Inc . -contributed excess value, it is deemed to have receive d a partnership interest in the section 721 . contribution . Subsequently, KTVU, Inc . made a constructive distribution of a portion of the KTVU Partnership interest for the'!benefit ofjthe Shareholder Trusts, which triggered section 311(b) gain . In his accompanying memorandum of law, respondent restates his position : ,i IP Simply stated, in the simultaneous transfers made by KTVU, Inc . ("Petitioner's Subsidiary") and by two partnerships to the newly formed .KTVU Partnership, the two transferors received partnership interests in excess of the value of the assets they transferred, and the Petitioner's . Subsidiary received a partnership interest of value less than :the value of the property it transferred . The partners which received greater interests were related to the shareholders of .Petitioner's Subsidiary, solithat their receipt of value greater than the,, amount they transferred to the - 15 - partnership was a constructive di tribution to th e shareholders of Petitioner's Subsidiary . There was no I negotiation of a business benefit to the Petitioner's Subsidiary for the excess value w ich it transferred to the partnership . The facts demon trate that the economic reality of what has occu red is a .distribution of appreciated property in the fo m of-partnership interests to the shareholders of Petitioner' s Subsidiary . Accordingly, Respondent asserted a deficiency based on the application of section 311(b)' . . The point appears to be that there was an identity of interests between the shareholder trusts and the famil y partnerships, i .e ., the beneficiaries o the former and the partners in the latter were, as a practical matter, identica l ( Mrs . Chambers , Mrs . Anthony, and the pineal descendants o f each), with the result that the family partnerships' gratuitou s receipt from KTVU, Inc ., .of enhanced or additional partnershi p interests in KTVU Partnership constitut d, in substance, a, distribution from petitioner to or for he benefit of th e shareholder trusts, taxable to petitioner under section 311(1') . In . respondent's view, the benefit :o the shareholder trust s .arose because, after the formation of K VU Partnership, the beneficiaries of those trusts "now held an interest, as either a partner in a Family Partnership or a so e shareholder in a corporation which was a partner in a Fa ily Partnership, in assets that were previously held by K , Inc .1110 In other' ! 10 We interpret respondent' s refere in assets that were previously held by the family partnerships' interests in s million that respondent alleges were gi interest in the balance of the station deemed to have purchased with their cas Partnership . 1 .1 ce to "an interest} * TVU, Inc ." as relatirng to ation assets worth'$60 .5 en to them, not to their ssets that they are! il l contributions to KTVU 1 16 - words, through the family partnerships, the shareholder trus t beneficiaries had eliminated the shareholder trusts and the three corporate layers that separated them from ownership of th e station assets . Significantly, they had defeated .the temporal division into life estates and remainders the terms of the shareholder trusts imposed so that, for instance, all th e partners (direct and indirect) of the'family partnerships, and not just Mrs . Chambers and Mrs . Anthony, shared in current incom e generated by the station assets .1' I In further support of his position that the primary purpose for the-formation of KTVU Partnership was to benefit the shareholder trusts, respondent argues that that transaction was orchestrated by the controlling trustees of those trusts, Mrs . Chambers . and Mrs . Anthony, in their capacities as members of petitioner's board and by Mrs . Anthony's son, James Cox . Kennedy, a remainder beneficiary of those trusts, in his multiple capacities as petitioner's CEO and president, chairman o f 11 We note that, in one of his filings with this Court in Chambers v . Commissioner , docket' Nos . 16698-06 and 16699-06, but not in this case, respondent argues that the formation of KTVU !Partnership also provided a tax avoidance benefit to Mrs . Chambers and Mrs . Anthony individually : What occurred here was a shifting of the life beneficiaries' income interests to the remainder beneficiaries prior to the deaths of * * * [the former], resulting in * * * [the,latter's] receiving a n accelerated gift,of the trust income * * * . This occurrence also caused the income . attributable to the life beneficiaries to escape taxation . In other words, the formation oflIKTVU Partnership effected an iassignment of income without payment of gift or income taxes by the assignors, Mrs . Chambers'and'Mrs . Anthony . iB - 17 i petitioner's board, and member of the bard's - executiv e committee, which actually ratified and approved the formation o f KTVU Partnership . i Respondent bases his argument that there was a section j 311(b) distribution by petitioner .on.c selaw holding that a corporation's transfer of money or property to a third party : primarily for the direct or tangible beiefit of a sharehol d er gives rise to .a constructive dividend o: distribution to that shareholder,12 and caselaw finding the th e shareholder when the primary purpose of benefit ;a member of the shareholder's f Although respondent argues that pe through ..KTVU, Inc ., of "additional valu in the form of increased partnership interests" to the family pa tnerships was made L "fo r the benefit of [the] Shareholder Trusts rather than directly, t o 1 11 them," respondent also characterizes th distribution as a distribution to the s the affiliated group ; i .e ., ."a distribu 12 See, e .g ., Stinnett's Pontiac Se v . Inc . v . Commissioner , 730 F .2d 634, 640-641 (11 h Cir . 1984), affg .i3T .C . Memo . 1982-314 ; Sammons v . Commissioner (5th Cir . 1972), affg . in part, revg . i part and remanding T .C . Memo . 1971-145 ; Commissioner v . Makrans , 321 F .2d 598, 601-602 (3d Cir . 1963), affg . 36 T .C . 446 (1961 ; Gilbert v . Commissioner , 74 T .C . 60, 64 (1980) . 472 F .2d 449, 45l-4'5i4 13 See, e .g ., Hagaman v . Commission ( .(6th Cir . 1992), affg . and remanding on 1987-549 ; Green v . United States , 460 F 1972) ; Byers v . Commissioner , 199 F .2d 1952), affg . a Memorandum Opinion of th Commissioner , 53 T .C . 459, 471-475 (196 r, 958 'F .2d 684, 690°--169 1 other issues T .C . Memo . 2d 412, 419 (5th Ciir 73, 275-276 (8th CJJr }II s Court ; Epstein v . - 18 - interests by KTVU, Inc' . to CCI, followed by subsequen t distributions of the partnership interests from CCI to * * "* [petitioner] and * * * (petitioner]-to the Shareholder Trusts . "1 4 Finally, in his memorandum of law under the heading "CONCLUSION", respondent states as follows : Petitioner's Motion for,,Summary Judgment must : fail . This case presents factual issues relating to valuation, and intertwined factual and legal issues regarding whether a distribution ''was made, and the determination of ;~.whether the, distribution was made with respect to stock . Petitioner, in its abbreviated statement of facts to the Court,~conveniently omitted facts which are-crucial to understanding the issues . As such,. summary' judgment is not appropriate . B . Petitione r Petitioner first',,Iargues thae section 311(b) simply does not applyto the formation of KTVU Partnership because there was no distribution of appreciated property by petitioner. to it s shareholders, "but rather, a contribution of property by KTVU, Inc . to-'KTVU partnership in exchange for a partnership interes t I! 14 Because the first two of those-alleged deemed distributions occur between members of an affiliated group within the meaning of sec . 1504, respondent notes that, under the consolidated return regulations in effect during 1993, sec . 311(b) gain is taken into account by the distributing corporation (KTVU, Inc .) upon the,; final alleged deemed distribution . from petitioner to the shareholder trusts . See sec . 1 .1502-14T(a), (Temporary Income Tax Regs ., .53 Fed . Reg . 12679 (Apr . 18, 1988), amended by 55 Fed . Reg . 9424 (Mar . 14(cid:127) ; 1990) and 58 Fed!. Reg . 134121(Mar . 11, 1993) . Respondent further notes that, in hi s it view, KTVU, Inc . ' s distribution of additional value to the family partnerships simultaneously triggered all three deemed .; .distributions, and thus its recognition of the alleged [sec . 311(b) gain is immediate . 19 * * * governed by * * * sections 721 (a) and 704(c) (1) (A) . i Consistent with that view, petitioner argues that (1) any disproportionally large partnership in erests received by {th e ea family partnerships were not received y "shareholders" ofi , petitioner, (2) the "built-in gain inherent in the * * * [statio n assets]", rather than being taxable to petitioner under sect on i !, gl 311(b), " is recognized by KTVU, Inc . irk accordance with the ' section 704(c) requirements", and (3) pursuant to thos e requirements, as set forth in regulatio s under section 704( a disproportionately higher amount of income and gain . [is allocated] to KTVU, Inc . over he tax life of the' contributed assets, so that over t at period KTVU, Inc . will be allocated the entire amoun of the [built-in] f is Sec . 721(a) provides as follows : SEC . 721 . NONRECOGNITION OF GAI N R LOSS ON CONTRIBUTION . ~ 11 (a) 'General Rule .--No gain o loss shall be recognized to>,a partnership or to any of its contribution of property to the pa an interest in the partnership . artners in the case of a tnership in exchanget,lfor Sec . 704(c)(1)(A) provides as fo lows : SEC,. 704 . PARTNER'S DISTRIBUTIVE HARE . (c) Contributed Property .-- (1) In general .--Under tegulation s prescribed . by the Secretary-- (A) income, gain, with respect to propert y the partnership by a part among the partners sous the variation between the property to the partnersh market value at the time * oss, and deductio n ontributed t o er shall be shared ; o take account of i basis of the .p and its fai r f contribution - 20, - gain inherent in the KTVU Station , Assets at the time of contribution . See sec . 1 .704 -1 (b) (1) (vi) , ( 5) , Example (13) (i) (built- in gai n on partnership's sale of propertylltaxed to contributing partner), Income Tax Regs ., see also 1 McKee et al ., Federal Taxation of Partnerships and Partners, par . 10 .04[1], at 10-109 through 10- 110 (2d ed . 1990) . Petitioner concludes : "Thus, except fo r timing differences , section 704 (c) puts KTVU, Inc . in the same position as if KTVU Inc .'s contribution of the KTVU Statio n Assets to KTVU Partnership had been immediately taxable as a sale for fair market value .. 16 In support of its position that sec . 704(c), rather than sec . 311(b), is the appropriate vehicle for taxing KTVU, Inc ., on any and all built-in gain attributable to the station asset s KTVU,, Inc :, contributed to KTVU Partnership, petitioner ;;relies on the decision of the Court of Appeals for the Sixth Circuit in Shunk v . Commissioner ;',173 F .2d 1,47, 750-752 (6th Cir . 1949), revg . .10 T .C . 293 (1948) . In Shunk , the Court of Appeals rejected the finding of this Court that an apparent bargain sale by Shunk-Manufacturing Co . (Shunk). to a newly formed partnership in which its shareholders held a';five sixths interest constituted a constructive dividend from Shunk to .:its shareholders .,E See i'~ Shunk v . Commissioner , 10 T .C . at 303-307 . The Court of Appeals concluded : The property sold by * * * [Shunk] was sold to the partnership ; it was not a transfer (or distribution) to its * * * shareholders * *.* . To hold otherwise would completely ignore the legal concept of a partnership . * * * [ Shunk v . Commissioner , 173 F .2d at 751 : 1 Petitioner also relies on certain legislative history j~attendant to the repeal of the General Utilities doctrine (derived from the Supreme Court's opinion in Gen . Utils . & Operating Co . v . Helvering , 296 U .S . 200 (1935), and stating that , ~a corporation generally did not recognize gain or loss-on a i distribution of appreciated or depreciated property to its shareholders with respect to its'stock) . S . Rept . 100-445 (1988) is the report of the,fCommittee on Finance accompanying S . 2238, 100th .Cong ., 2d Sess . (1988), which formed the basis for part o f . ) (continued . . 11 - 21 - Even assuming arguenao tnat sects ns 721 aria 704(c) ar e not the exclusive governing provisions, pe itioner argues that , section 311(b) would still not apply because petitioner madejn o i I I distribution to any of its shareholdersl . Petitioner purport s to distinguish . the caselaw respondent cites in support of his' Jl argument that KTVU, Inc .'s gratuitous transfer of partnership interests to the family partnerships was for the benefit of .the shareholder trusts and , therefore , constituted a constructiv e I dividend to those trusts . Petitioner argues that the 16( . .continued ) the Technical and Miscellaneous Revenue 647, sec . 1006(e)(5)(A), 102 Stat . 3400 337(d) . In pertinent part, the repor t 100- Section 704 ( c) of the Code ge gain attributable to appreciated p to a partnership by a partner be a partner ; it is expected that this prevent the use of a partnership t of the amendments made by subtitle Act (for example, by attempting to corporation appreciation to anothe corporation regime ) . * * * [ S . Rep 67 . 1 erally requires that : operty contributed-'' located to tha t ule would generally' avoid the purpose s D of Title VI of the'" shift the tax on C party or to a non!, c 100-445, supra at- Petitioner cites the foregoing stateme n view that the code provisions effecting Utilities doctrine, including sec . 311( apply where section 704(c) already app l corporate transferor . " as confirmation of its the repeal of the Genera l ) . "are not intended'°,t o es to tax the gain to the Finally, petitioner adds that the . to fair market value is a reference to that, if, in fact, the station assets h respondent claims, . respondent "can chal [and] require that the section 704(c) a accurate fair market Value ." In other adjustment would be to increase KTVU, I taxable to KTVU, Inc ., under sec . 704(c distribution by petitioner taxable to p 311(b) . . 7 0 4 (1 c ) eference in sec ; rue fair market value s o ve been undervalued''ls enge that valuation locations be based upon ords, the appropriates c . s built-in gain 1, , .not to find a deemed titioner under sec .' t - 22 - constructive distributees in the cited cases had the authority to effect the transfers in question whereas . Mrs . Chambers and Mrs . Anthony, in their capacity as trustees of the shareholders trusts, were without authority, under . the trust instruments, transfer KTVU'Partnership interests (which would represen t additions to trust principal) to anyone until termination of th e trusts . Petitioner also notes that (1) "Mrs . Anthony and Mrs . Chambers, as two of the eight directors [of petitioner] controlled neither the board nor any decisions regarding busines s ventures, including the KTVU Partnership", and (2) "it cannot * * be assumed that the''independent directors [on the executive committee] * * * acted to favor non-shareholders of * *+* jr[petitioner] by directing .KTVU . [sic] Inc . to distribute 'extra ' partnership interests to .* .* * [the family partnerships] contrary ~to(cid:127)their duties as directors .andmembers of . the executive committee .". Thus, even if Mrs . Chambers and Mrs . Anthony had had 'the authority to effect the transfer of "extra" partnership interests in KTVU Partnership to the family partnerships, they lacked the power to do so, and the outside (nonfamily) directors ' power to effect that transfer was circumscribed by their fiduciary. responsibilities to petitioner . Finally, petitioner argues that even if one assumed a distribution of partnership interests to the family partnerships, the "[t]he Family Trusts * * * received absolutely no benefit, direct, tangible or otherwise, as a result of the assume d ildistribution" . Indeed, petitioner argues that the shareholder 23 - trusts would have been harmed by such distributions becausei i premature distributions of trust princ'pal would .have contradicted the terms of the respectiie trust instrument s .(violating the trustees ' duties of imp rtiality) and diminished the trustees economic ability to carry out Mr . Cox's wishes .i' I II . Analysis 11 A . Existence of a Genuine Issue f Material Fact Because, for purposes of the motion, petitioner concedes a .$300 .million value for the station assets contributed by K T1VU, . Inc ., to KTVU Partnership and a $239 .5 iillion value for the e partnership interest it received in exc ange therefor, valuation is not an issue herein . Moreover, resp ndent does not identif y 4j the "intertwined factual and legal issu s regarding whether a distribution was made" or whether it " w s made with respect t o stock 1,8 nor does -he identify the "con which' are crucial to understanding th e because respondent has failed to satisf 121(d) to "set forth specific facts sh o 17 . In other words, the family trus t would have been harmed because such distributions were not p e instruments and would, to the extent ma of the wherewithal to carry out the se t itted by the trust,- i e, deprive the trustees' lor's wishes . 18 We find that the question of wh e exchange of the station assets for a ma interest in KTVU Partnership involved a petitioner with respect to its stock, f 301(a) and ..311(b), raises an issue of 1 applying the applicable caselaw, discus undisputed facts . her KTVU, Inc .' s ority partnership distribution by r purposes of secs . w to be decided by' ed infra, to the - 24' - genuine issue for trial " we will not deny the motion for tha t reason . Existence of 'a Dividend Subject to Section 311 (Ib) 1 . Respondent's Alternative Position s Respondent argues. that, in substance, KTVU, Inc .'siassumed gratuitous transfer of partnership interests in KTVU Partnershi p .to the family partnerships constituted a constructive dividend from petitioner to the shareholder trusts causing petitioner t o .recognize $60 .5 million of unrealized-gain pursuant to section 311(b) . .19 'Respondent appears to .have charted two alternative if 19 Petitioner's concession regarding the $60 .5 million disparity between the,, value of the station assets KTVU, Inc contributed to KTVU Partnership and the value of the partnershi p interest it received is not a'concession that the family partnerships' partnership interes'!ts were enhanced by that amount . Indeed, in response to an informal discovery-request from petitioner, respondent states his positions that (1) the property he asserts KTVU, Inc . ; distributed was a partnership interest in KTVU Partnership while .(2) the property to .be valued to determine gain under sec . 311(b) is the KTVU, Inc, ., assets contributed to 'that partnership . He continues : "The fair market value component of property!, distributed by KTVU, Inc . under I .R .C . § 311(b) would be the same whether the constructively distributed property is KTVU television assets or ;an interest in the partnership ." Respondent relies on Pope & Talbot, Inc . v . Commissioner , 162 F .3d 1236 (9th ;~Cir . 1999), affg . 104 T .C . 574 (1995), in support of that position . In Pope & Talbot, Inc . v . 4 . Commissioner , supra at 1239, the Court of Appeals held that, fo r purposes of determining Pope & Talbot, Inc .'s hypothetical gain if under what is now sec?. 311(b)(1) ,' the .hypothetical sale was of ithe property the corporation owned at the time of the distribution (improved and unimproved,,, real property) and not the ,aggregate .value of the individual limited partnership units the 11corporation distributed . There appears here to be a discrepancy between the $60 .5 million . difference in value that respondent would .. cause petitioner to treat . as resulting in recognized gain sunder sec . 311(b) and: the $7,825 ;000 difference between the '!determined value of the two family partnership interests in KTVU 1j Family Partnership and the $62 million those partnership s contributed . We need not resolve that discrepancy . The sol e (continued . .. .) - 25 - paths to arrive at that result . . Under one approach , he argue s that the transfer was, in fact, to the family partnership s that'it was for the benefit of the sha eholder trusts and , therefore , constituted a constructive ividend to those trusts . ii Under the other, he posits a constructive dividend from KTVU , Inc ., to its parent , CCI, and from CCI to its parent , petitioner, 1. 1 1 followed by petitioner ' s constructive distribution to th e shareholder trusts . Respondent appears to favor the .first'°p'ath , stating that "[f]or purposes of this-ca se, i t is only necessary to establish that appreciated assets le f t the corporate! solutio n of KTVU ,, Inc ., for the-benefit of its Shareholder Trusts" . 20 Assuming that the transfer . to the famil partnerships was for the benefit . of the shareholder trusts, resp ndent's apparentl y favored approach is clearly sustainable under the applicabl e caselaw '( discussed infra ) . Therefore, since respondent does no t 19( . . . continued ) issue involved in .the motion is the exitence ( or nonexistence) of a sec . 311 ( b) distribution of proper y, not the identity or value of the transferred property . assuming " the family partnerships recei ed partnership interest s worth more than their cash contribution to trigger the application of sec . 311 (b) that assumed to the family partnerships must constit y petitioner to the shareholder trusts, w view, it does not . transfer from KTVU ,I ' Inc ., to a distribution from ich, in petitioner's ! Petitioner argues that even N 1 f 20 We find additional support for o favors the first path in his statements characterization and taxation of the tr partnership interests from the Sharehol Partnerships is not here at issue" (emp relationships between the Shareholder T beneficiaries , and the Family Partnersh transfer to the Family . Partnerships was benefit of [ i .e ., not to] the Sharehold added) t r view that responde n that "the nsfer , if any , of the er Trusts to the FamiJl y asis added ), and "the usts, thei r ps illustrate that,the directed by and for he r Trusts ( emphasis q - 26 - claim,-that it makes any difference, and since he appears ; to favo r the first path, the issue we address is whether KTVU ; Inc .'s assumed gratuitous transfer to the family partnerships 11, constituted, in substance, a constructive dividend by petitioner to the shareholder trusts subject ; to section 311(b) . 2 . Discussio n a . Introductio n Petitioner's principal argument is a legal argument that . .the Internal, Revenue Codej1provisions :pertaining to partners and partnerships (subtitle A, chapter 1, subchapter K), preempt application of the provisions pertaining to corporat e distributions and adjustments (subtitle A, chapter 1, subchapter C) when considering the tax effects of a partner's capital contribution to a partnership . More precisely, petitioner argues that 'section 704 (c .) , which, like ,section 311(b), effectively taxes'KTVU, Inc ., on the built-in gain associated with the station assets , preempts the application of section 311(b) to an y portion of that gain ." e . ; .21 Although sec . 704(c)(1)(A) taxes the contributing partner ion, any built-in gain associated with property that partner contributed, on Sept . 1, 1993, the date of KTVU, Inc .'s contribution of the station assets to KTVU Partnership,, ?contributors of property to a partnership were still permitted to rely!on regulations issued under prior law, which made the contributor's'recognition of the entire built-in gain elective . ,See sec . 1 .704-1(c)(2), Income Tax Regs ., which was replaced by regulations effective'for contributions made on or after Dec . 21, 1993 1 ;,, TD 8500, 1994-1 C .B . 183 ;,see also 1 McKee et ali, ., Federal Taxation of Partnerships and Partners, par . 10 .04[3], at 10-113 1(2d ed .-1990) . According to article 4 .6(a) of the KTVU "Partnership agreement, the partners made that election,, and fo r that'll reason KTVU, Inc ., was, in fact,Etaxable on the built-i n . (continued . 1~ ~ . .) - 27 - Because we decide the motion on - g ounds that effectively render . moot the legal issues petitione raises, we need note address either - the preemption issue or petitioner ' s argument tha t Mrs . Chambers and Mrs . Anthony , in the i r dual capacitie's a's, i controlling trustees of the shareholde trusts and members ..o petitioner ' s board, had neither the au horny nor .the power~ o effect a contribution of the station assets by KTVU, Inc ., ' KTVU Partnership for the benefit of an one until (cid:127) terminationj of . the shareholder trusts .22 We shall gra t petitioner ' s motion on the ground to which petitioner also alludes, that the undisputed facts fail to demonstrate that KTVU,' I c .'s assumed gratuitou s transfer of partnership interests to the family partnership s was made primarily to benefit the shareholder trusts, or, alternatively , that it actually provide , a benefit to the shareholder trusts . 21 ( . . . continued ) gain associated with the station assets as petitioner alleges . 22 The issue of whether Mrs . Chambers and Mrs . Anthony (w ho , A as controlling . trustees of the shareholder trusts, were ; arguably , in a position to select all the members of petitioner's board ) had the power to control petitioner's board and its decisions would appear to present a question of material fact sufficient to result in a denial of the motion were deciding,?that issue necessary . ("[T]he appropriate test for determining control over-corporate action * * * is whether the taxpayer has exercised substantial influence over the corporate action * * * . factual" . Because we find resolving he "power" issue unnecessary , we need not deny the motio on that ground . See Green v . United S ates, 460 F . 2d at 420 The inquiry is ) . 11 II j. - 28 - b . The Caselaw Sammons v . Commissioner , . 472 F ..2d 449, 451-452 (15th Cir . 1972), affg . in part, revg . in part and remanding T .C . Memo . 1971-14 5 , the Court of Appeals for the Fifth Circuit set . forth standards for determining whether .a corporation's transfer of property to a . third party constitutes a dividend to the transferor corporation's shareholder(s) .23 The taxpayer in Sammons guaranteed and then assumed a ,,debt obligation of a second-tier subsidiary of a corporation 99 percent owned by the taxpayer . The issue was whether the taxpayer's purchase of preferred stock from its insolvent or near insolvent second-tier subsidiary was primarily intended to provide that subsidiary with funds sufficient to reimburse the taxpayer for his payment of the if I! subsidiary's debt obligation with ; the result that that I transaction gave rise to a constructive dividend to the-j~taxpayer . After acknowledging the "well-established principle that a transfer of property from one corporation to another corporation may constitute a dividend to * * * [a common shareholder of] bot h corporations", id . at 451, the .Court of Appeals set forth what i t described as a subjective and an objective test for determining 23 Barring a stipulation to the contrary, this caseis appealable to the Court of Appeals for the Eleventh Circuit . See sec . 7482 (b)(1)(B) . The Court of. Appeals .for the Eleventh t Circuit has, held that any case t1- e Court of Appeals for the .Fift h i,Circui decided before Oct . 1, 19'81, is binding precedent upon 'it . See Bonner v . City of Prichajrd , 661 F .2d .1206, 1207 (11th Cir X11981) . 1972),- which we have followed in determining whether an' . intercorporate transfer constitutes a constructive dividend to a common shareholder, e .g ., Chan v .'i Commissioner , T .C . Memo . 1997-154, is such a case . . Commissio,ner ,,:472 F .2d 449 (5thi'Cir . Sammons v . - 29 - whether such a transfer does, in fact, constitute a dividendifrom the transferor corporation to the shareholder . The subjective o r primary purpose test requires that the distribution or .tran s if er be made primarily for the benefit of the shareholder rather han for a valid business purpose . Id . The objective or distributio n test requires that the distribution or transfer caused "funds or other property to leave the control of the transferor corporation ii and * * * [allowed] the "stockholder to exercise control over suc h f q . funds or property either directly or indirectly through some, 9 i instrumentality other than the transfe or corporation ." Id . Both tests must be satisfied to find alconstructive dividendit o the shareholder of the transferor corporation . Id . In .Stinnett'sPon tiac Serv ., Inc . Commissioner , 73 0 F . 2 d 634, 64 1 (11th Cir . 1984 ), affg . T .C . Demo 1982-314, the Cour t of Appeals for the Eleventh Circuit ci es with approval th e observation of the Court of Appeals fo the Fifth Circuit in } Kuper v . Commissioner , 533 F .2d 152, 1 0 (cid:127)(5th Cir . 1976), affg . in part and revg . in part 61 T .C . 624 1974), that, in applying the Sammons primary purpose test, "the search for this underlying purpose usually involves the objective criterion of actual .primary economic benefit to the share h lders as well " ; i .e ., there is an "objective facet" of tha t est that "inevitably overlaps with the Sammons ' objective d stribution test" . The Court of Appeals for the Eleventh Circ it states the point .as follows : 30 - In determining whether the primary purpose test has been met , we must determine not only whether a subjective intent to primarily benefit the shareholders exists, but also 'whether an actual primary economic benefit exists for the shareholders . * * * [ Stinnett's Pontiac Serv ., Inc . v . Commissioner , supra at 641 . ] Accord Gilbert v . Commissioner , 74 T .C . 60, 64 (1980 ) ("[T]ransfers between related corporations can result in constructive dividends to their common shareholder if they were made primarily for his benefit and if he received'a direct or tangible benefit" .) . If the benefit to the shareholder is "indirect or derivative in nature , there is no constructive dividend ." Id . ; see also Rushing V . Commissioner , 52 T .C . 888, 894 ( 1969 ) ("[ W]hatever personal benefit, if any, Rushing [the sole shareholder of the transferor and transferee corporations ] received was derivative in nature . Since no direct benefit was received , we cannot properly hold he received a constructive dividend ."), affd . o n another issue 441 F .2d 593 (5th Cir . 1971) . Finally, as respondent points out in his memorandum of law in support of his notice of objection,~courts have found the requisite benefit to the shareholder when the primary purpose of the corporation's distribution or transfer of money or property is to,or. for the benefit of a member of the .shareholder ' s family . See, e .g ., Hagaman v . Commissioner, 958 F .2d 684 , 690-691 (6th Cir . 1992 ), affg . and remanding on other issues T .C . Memo . 1987- 549 ; Green v . United States ,~ 460 F .2d 412 , 419 (5th Cir . 1972) ; Byers'v . Commissioner , 199 F .2d 273, 275 (8th Cir . 1952), affg . a - 31 - Memorandum Opinion of this Court ; E st in v . Commissioner, 513 T .C . 459, 471-475 (1969) . In both Green and Epstein , the courts' approach was t o decide whether there had . been a bargain sale by a corporation th e taxpayer controlled to trusts for the benefit of his minor,", children (and, therefore, a constructs-\;e dividend to the 3i taxpayer) on the basis of the parties' competing valuations°o f the property sold . We .conclude, however, that neither case : stands for the proposition that the me e finding of a bargain sale based on competing property valuations requires a findin g that the transfer constitutes a constructive dividend to th e shareholder, regardless of intent .. In Green v . United States , supra at 420, the Court of Appeals : . focused on two . issues : valuati n of the property alleged to have .'been sold . for a bargain price which issue it remanded ) and theshareholder's control over the corporation's actions ; i .e ., his "ability to divert a dividen or a bargain sale t o * [his] chosen recipient" . In addressing the latter issue, the Court of Appeals stated as follows : We emphasize that the finder of fact must also be allowed to consider, for what he thinks it is worth, that the corporation did in fact consummate a transaction with favorable conse ences for the taxpayer personally or for his immediate family ; this .'^^ circumstance is surely one tendin to prove that the taxpayer exercised substantial in luence [the court's test for control] over corporate action . [ Id . at 420' 421 .] 11 - 32 - We consider that language to be fully consistent with the .Court of Appeals ' own primary purpose test set forth in Sammons V . Commissioner , supra , and , in particular , with the notion that the taxpayer necessarily would have exercised his "substantial influence over corpora,te .action " for the sole purpose of benefiting his minor children . , Indeed, the Court of Appeals itself noted : " The approach suggested is entirely consisten t III with * * * Sammons " . Green v . United States , supra at 421 . In Epstein , a case decided before Sammons , we found a constructive dividend to the taxpayer shareholder because we found a .., bargain sale by the corporation to trusts for the benefit of the taxpayer ' s children . The latter finding was based on our determination of the property ' s value :after reviewing the parties after-the - fact expert witness ; valuations and the evidence underlying them . Although there is no discussion of any need for , evidence of corporate or-shareholder intent to :make a bargain sale, we clearly expressed our belief that that intent was present in the case . For example , in justifying constructive dividend treatment , we observed : The device of having a corporation make a transfer of property , for no or insufficient consideration, to a person other than a stockholder has not been to o successful in avoiding dividend treatment to the stockholder whose own purposes have been satisfied by such transfer . "The petitio er controlled the Willoughby Co . It acted solely to accommodate him in making the transfer . He enjoyed the use of the property by having it . transferred for his own purposes . * * *" [ Epstein v . Commissioner , supra at 474 - 4.75 (quoting Clark v . Commissioner , . 31 B .T .A . 1082 , 1084 ( 1935 ), affd . 84 F . 2d 725 ( 3d Cir . 1936)) .] - 33 - The foregoing language leaves no doubt constructive dividend to the taxpayer principally on a finding that there wa the bargain sale, and that it was sole taxpayer's desire to confer an econom i (1) Petitioner's Intents in Forming KTV U Partnershi p (a) Introduction Respondent argues that "it is on l necessary to establish that appreciated assets left the corpo ate solution of KTVU,, l Inc ., for the benefit of its Shareholde r Trusts, to establis h that there has been a distribution wit Shareholder Trusts' stock to which sec ion 311 applies ." HeIthen argues that "the relationships betwee n the Shareholder Trusts, their beneficiaries, and the Family P a tnerships illustrate-tha t the transfer to the Family Partnership was directed by andffo r the benefit . of . the Shareholder Trusts ." Lastly, as "[f]urthe r t l 4 ;I proof of benefit to the Shareholder Tr sts," he argues : I trustees of the Shareholder Trusts, Mrs . Chambers and Mrs . Anthony approved KTVU, Inc .'s receipt f .less than fair marke t value for the appreciated assets transferred . " Assuming arguendo that Mrs . Chambers and Mrs . Anthony, acting in concert, were responsible foi both petitioner's decision to form KTVU Partnership and the manner in which it wa s formed, the undisputed facts do not support respondent' s characterization of that transaction . That is, the facts do'not - 34 - support respondent's conclusion that Mrs . Chambers and Mrs . Anthony purposely approved KTVU, Inc .'is contribution of ;the station assets to KTVU Partnership in exchange for a less tha n fair market value partnership ..interest (i .e ., that they caused KTVU, Inc ., to deal with the family partnerships at less than arm's length) to provide an economic benefit to the famil y partnerships and, derivatively, to the shareholder trusts . Even assuming an identity of interests among the entities involved in the transaction (petitioner, KTVU, Inc ., the shareholder trusts, and the family partnerships), that is not, in and of itself , evidence that the related individuals common to those entities in particular, Mrs . Chamber and Mrs . Anthony) acted i n concert purposely to violate the arm's-length standard in formin g KTVU Partnership . See, e .g ., Rushing v . Commissioner , 52 T .C . at 894 (-The fact that Rushing was the sole shareholder of bot h L .C .B .,and Briercroft .is not a sufficient basis for concluding that Rushing constructively receii, ed the advances of L . C . B . [to Briercroft .]") . Moreover, the undisputed facts strongly indicate that the parties to the formation of KTVU Partnership intended an arm's-length transaction . (b)- Factors Relating .to Petitioner's Intent (i) Business Reasons for the Formation of KTVU Partnershi p As discussed sura, petitioner continued to operate KTVU '(TV) through KTVU Partnership only because petitioner could not sell it . .By operating the station in,that manner petitioner was able~to reduce its investment in the television broadcast - 35 - business, use KTVU, Inc .'s working cap :tal'in other busines s areas, and allay concerns among petitioner's television broadcas t executives that petitioner was abandoni ng the televisio n broadcast business by demonstrating th~ Cox family' s ongoin g commitment to it . (ii) The .Executive Committee Resolutio n The August 6, 1993, resolution of the executive committee o f petitioner's board specifically required that the family partnerships'- cash contributions to KT partnership be "in an amount corresponding to the fair market, value of the partner1ship interests acquired by-such Family Parterships", and that th e family partnerships' acquisition of partnership interest s in; KTVU Partnership "be on terms and condition no .less favorable t o * * [petitioner] or KTVU, Inc . than the terms and conditions that would apply in a similar transaction with persons who ar e not Gi affiliated with * * * [petitioner]" . (iii) The Outside Appraisals and Additional .Cash I, ( f I Contributions by-the Family Parthershibs Before forming KTVU Partnership, petitioner retained an outside accounting firm, Arthur Andersen, "to render an opinion of . the appropriate marketability and minority interest'discolnts applicable to a minority interest in t e KTVU Partnership as o f August 1, 19 .93", the date of its formation . Then, in 1996, because petitioner's management discovered that errors had ; been made in computing each family partnerslip's interest in KTVU' Partnership, Furman Selz was retained to revalue those interests . Furman Selz determined that the correc fair market of each-of - 36 . - those interests as of August 1, 1993, was $31 million . On September 12, 1996, in response to that determination, eac h family partnership contributed an additional $4 million to KTV U Partnership to bring the total contribution of each to $3 1 ij million . (iv) Fiduciary Responsibilities of Petitioner's Board of Directors and Majority Shareholder s Respondent asserts (and petitioner here concedes) that KTVU , Inc ., gratuitously transferred KTVU Partnership interests to th e family partnerships and that Mrs . Chambers and Mrs . Anthony stood on both sides of the tlransaction . The parties, however, dispute whether those facts require us-to find that Mrs . Chambers an d Mrs . Anthony intended that gratuitous transfer . We agree with . petitioner : In light of United States v . Byrum , 408 U .S . 12 5 (1972), we need not find intent on those facts alone . Even assuming Mrs . Chambers and Mrs . Anthony controlled petitioner' s board and could direct petitioner ' s actions , because the applicable State law imposes fiduciary duties on corporate directors and majority shareholders ( e .g ., Mrs . Chambers and Mrs . Anthony), we may not necessarily conclude ( as respondent does) that Mrs . Chambers and Mrs . Anthony intended to make a gratuitous transfer to the family partnerships . In United States v . Byrum , supra-at 137-138, the Suprem e Court observed that in almost every if not every State "[a] majority shareholder has a fiduciary duty not to misuse his power by promoting his personal interests at the expense of corporate interests and that "the directors also have a fiduciary duty to- - 37 - promote the interests of the corporation ." Whether petition'er's majority shareholders and directors were subject to the laws of Delaware ( the State of petitioner ' s incorporation) or Georgia (the State in which petitioner has its principal offices ),'they had fiduciary responsibilities of the type referred to'in Byrum . See Ga . Code Ann . sec . 14-2-830(a) (20(3) ( enacted in 1981) .21, ("A director shall discharge his duties as a director , includi:nglhi s duties as a member of a committee : (1) In a manner he believes in good faith to be in the best interests of the corporatilo , In re Reading Co . , 711 F .2d 509, 517 ( d Cir . 1983) ("Under' k Delaware law, corporate directors stan in a fiduciar y relationship to their corporation and 'ts stockholders ", and " a majority shareholder * * * has a fiduciary duty to the . 61 corporation and to its minority shareholders if the majority ; shareholder dominates the board of .dir ctors and controls to corporation .") ;. GLW Intl . Corp . v .(cid:127) Yao , 532 S .E .2d 151, 15511(Ga . Ct . App . 2000) ("It is well settled th .t corporate officers an d directors have a fiduciary relationship to the corporation' and its-shareholders and must act in good aith .") ; Marshall v' W .E . Marshall Co . , 376 S .E .2d 393, 396 (Ga . Ct . App . 1988) ("[M]ajority shareholder who really controls the corporation has a "fiduciary relationship * * * to protect minority shareholders" and "majority shareholders must act in .good faith when~manag!ing corporate affairs" .) . it 24 See 1988 Ga . Laws p . 1070, sec . KTVU, Inc .'s assumed gratuitous transfer of a substantial - 38 - partnership interest in KTVU Part lership necessarily would hav e . I I reduced its distributive share of r income and liquidation (o r sale ). proceeds from KT-VU-(TV) by the amounts that would have bee n attributable to that interest . Thus, the assumed transfer necessarily would have ; resulted in financial detriment to (and , therefore, would not have been in the best interests of)KTVU, Inc ., and the minority„ shareholders of-its ultimate parent, petitioner . We agree with petitioner that such a transfer would . represent a breach of the majority shareholder ' s and directors' fiduciary duties to petitioner and to the minority shareholders who, unlike the beneficiaries of the ( majority ) shareholde r trusts, did not own interests in the family, partnerships and, therefore , would not be made financially whole for the likely shortfall in income and liquidation ( or sale) proceeds . ,1 In,.'United States v . Byrum , supra, the decedent owned a majority of the stock in three corporations and transferred shares in those corporations to an irrevocable trust for his children . He retained the right to vote the transferred shares , veto any investments and reinvestments by the trustee, and replace the trustee . The Commissioner determined that thos e retained rights caused the values of the shares to be includable in his i :gross estate under either section 2036 ( a)(1) (retentionof the enjoyment of or right to income from the property ) or section 2036 ( a)(2) (the right to designate who shall enjoy the propert y or the income therefrom ) . As we observed in Chambers v . li - 39 - Commissioner , 87 T .C . 225, 232 ( 1986), Byrum , in rejecting the Commissioner's emphasized the fiduciary duties of a m the directors of a corporation ." The constraints on majority shareholders a corporation as follows : Whatever power Byrum may have possessed with respect toj the flow of income into the trust was derived not from an enforceable legal right specified in the trust' instrument , but from the fact that he could elect a majority of the directors of the three corporations . The power to elect the directors conferred no legal right to command them to pay or not to pay dividends ., A majority shareholder has a fiduciary duty not to misuse his power by promoting his personal interests at, the expense of corporate interest Moreover, the .1 1 directors also have a fiduciary d ty to promote the interests of the corporation . However great Byrum's influence may have been with thecorporate directors , their responsibilities were to al stockholders and were enforceable according to leg 1 standards entirelyl unrelated to the needs of the trust or to Byrum's desires with respect thereto . [ U ited States v . Byrum', supra at 137 - 138 ; fn . refs . . omitt d . ] In the light of the Supreme Court's reasoning in Byrum, we agree with petitioner that, on the evi ence before us, it woul d be improper to find that Mrs . Chambers and Mrs . Anthony , as,both directors of petitioner and trustees o the shareholder trusts , purposely acted for the benefit of the trust beneficiaries ( and to petitioner ' s detriment ) by directin q . KTVU, Inc .., to distribute "extra" partnership interests to the,other .KTVU Partnership partners contrary to their fiduciary duty to petitioner ,andlit s minority shareholders .' (c) Conclusio n 4 0 The foregoing factors ( the nontax business reasons for the formation of KTVU Partnership, the executive committee o resolution , the use of : outside appraisals to determine and, later, increase the family partnerships ' capital contributions to KTVU Partnership , and the fiduciary responsibility constraints against self - serving actions by the majority shareholders and directors of petitioner) demonstrate that there is no reason to ' conclude that either Mrs . Chambers or Mrs . Anthony or any of petitioner ' s other directors intended a gratuitous transfer by KTVU, Inc ., to KTVU Partnership of station assets worth $60 . 5 million . Rather , assuming that that transfer did, in fact, 14 occur, . the undisputed facts strongly indicate that it was unintentional . Therefore, we conclude that KTVU, Inc .'s transfer of the station assets to KTVU Partnership was not intended t o provide ,~.a gratuitous economic benefit to the other partners and , derivatively, to .the shareholder trusts . (2) Existence of a Benefit to the Shareholder Trust s (a) Analysi s The terms of the three shareholder trusts make clear tha t Mr . Cox intended to have all the net income therefrom paid to (1) Mrs . Chambers and Mrs . Anthony (under-the Dayton trust (at all times !i, here relevant)), I, (2) Mrs . Chambers ( under Atlanta ..Trust I), and (3) Mrs . .Anthony ( under Atlanta Trust II ) . The trust terms also make clear his intent that only upon the death of thos e { i~ i - 41 - income beneficiaries were the trust co pora to be distributed to I I his children's lineal descendants . In general, the terms of the trust . determine the nature and extent of the duties and powers of a trustee . 3 Restatement Trusts 3d, sec . 70 (2007) . It is also generally-accepted that a trustee's first or primary duty is to 1) act wholly for the' benefit of the trust, (2) preserve the trust assets, and (3)',j carry out the settlor's intent . See 7 Am . Jur . 2d, Trusts,r sec . 331 (2005) ; see also 90A C .J ..S ., Trusts, sec . 321 (2002) ("By accepting the trust, a trustee becomes bound to administerlit, o r .to execute it, in accordance with the Jrovisions of the tru s instrument and the intent of the settl r" (fn . refs . omitted)) ; id . sec . 322 ("It is the trustee's paramount duty to preserve and protect. .the trust estate in compliance with the terms of th e ! ,I trust ."') 2 5 I Zs As evidenced by their filings i Chambers v . Commissioner , docket Nos .- 16698-06 and 16699-06, the parties agree that the Atlanta trusts, created in Georgia, are governed by Georgia law and the Dayton trust, created in Ohio, is governed by Ohio law . The laws of those two States generally incorporate and are consistent with the foregoing principles of trust law . .See, e .g ., Ga . Code Ann . sec . 53-12-19 (1997) (Trustee duties ) (generally applying "the common law duties of the trustee") ;j id . sec . 53-12-211 (Duty of trustee as to receipts and expenditure) (generally requiring compliance with "the terms of the trusty) ; Ohio Rev . Code Ann . sec . 5808 .01 (2006) (Duty to administer trust) ("[T]rustee shall administer the trust in good faith,l'in accordance with its terms and purposes and the interests of the beneficiaries" .) ; id . sec . 5808 .04 (Prudent administration) 1("A trustee shall administer the trust as prudent person would and shall consider the purposes, terms, di tributional requirements, and other circumstances of the trust .") . 42 - If., as respondent argues, Mrs . Chambers and Mrs . Anthony, through their control over the corporate actions of petitioner, caused petitioner to have KTVU, Inc ., make a gratuitous transfer of partnership interests representing as much as $60 .5 million in station assets to the .family partnerships, they necessarily would have violated their duties as trustees of the shareholder trusts . By stripping the trust corpora of valuable .. assets for inadequate consideration, Mrs . Chambers and Mrs . Anthony would have failed to preserve the trust assets ; by granting their linea l descendants (holders of the remainder interests) immediate access to both income and principal attributable to the gratuitously transferred assets (through membership in the family partnerships), they would have failed~to carry out the settlor's, (Mr . Cox's) intent as expressed in the trust instruments . As -respondent suggests, the shifting of assets from petitioner (the stockAof~which constituted the entire corpus of each shareholder (trust) to KTVU Partnership may have benefited the remainder beneficiaries by accelerating their enjoyment of income and principal and satisfied the desire . of Mrs . Chambers and Mrs . Anthony. to shift trust income from themselves as life 11 beneficiaries to the remainder beneficiaries . Nevertheless, the beneficiaries are not the trusts, and Mrs . Chambers's and Mrs . Anthony's fiduciary obligation under the trusts was to administer the trusts in accordance with the ; terms thereof, not in i 43 - accordance with the conflicting desire of the beneficiarie {.2 6 Indeed, one . can imagine the trustees' ctions being carries . o their logical extreme whereby the trustees would have petitione r transfer all its assets to KTVU Partne ship thereby leaving the t trusts holding stock in an empty shell nd, in effect , terminating the shareholder trusts . tinier those circumstances , one would be hard pressed to conclude that the trustees had acte d 11 for the benefit of the shareholder tru s S . 2 7 26 In this discussion, we treat th e entities separate and apart from the tr That treatment appears to be in accord trust set-forth in 1 Restatement, Trust section defines,a trust as, in essence, with respect to property" . In "Comment authors of the restatement add the .fol l shareholder trusts a stees and beneficiaries . ith the definition of a s . 3d, sec . 2 (2007) . That "a fiduciary relationshi p a . Terminolocry " , the!! wing clarification : El Increasingly, modern common-1 concepts and terminology tacitly r a legal "entity," consisting of th the. associated fiduciary relatio n and the beneficiaries . This is in ,appropriately reflected both in l a for example, to the duties or liab "the trust") and in doctrine, espe distinguishing between the trustee individual and the trustee in a fi representative capacity . H w and statutory cognize the trust as l EP trust estate and etween the trustee reasingly an d guage (referring , lity of a trustee toil ially i n personally or as an uciary or ! ° : 0 27 This analysis is consistent with Santa Fe Pac . .Gold .Co . v . Commissioner , which we held that the taxpayer's payme "termination fee" to a putative white k hostile takeover of the taxpayer by ano constituted a currently deductible expe result, we noted that the taxpayer's bo the hostile takeover and rejected the "Delaware fiduciary duties laws require obtain the highest value for the compa n (slip op . at 30) . After the hostile the termination fee, the acquiring comp employees, released most of its manageme headquarters, discarded its business pla our recent decision in 132 T .C . (2009) in . t of a $65 millio n ight in connection with a her corporation diture . In reaching tha t rd of directors approire d hite knight " because . Santa Fe's board to , 's shareholders . ." takeover that triggere d y fired the taxpayer' s t, shut down its s, and, therefore , Id . at (continued! . .) i! In determining that actions by a,trustee that violate the terms,of a trust, but are favored'i'by the trust beneficiaries, may be detrimental to the !trust, we are mindful of the general rul e that a settlor or grantor who is not also a trust beneficiary (e .g ., Mr . Cox were he still alive) may not maintain a suit-to ip enforce the terms of the trust . See, e .g ., 3 Scott, Trusts 211 !f(4th ed . 1988) (interpreting 1 Restatement, . Trusts 2d, sec . 200 (1950) .) ("Where a trust is created inter vivos and th e [nonbeneficiary] settlor is still alive, it would seem that h e 1E '4 . cannot maintain a suit to enforce the trust .") ; 76 Am . Jur . .2d , ,Trusts, ,; sec . 615 (2005 ) ("An action * * * to enforce the trus t must ordinarily be brought by beneficiaries, trustees, or someone representing them, and not the settlor of the trust or a representative of t.he,,settlor ." (Citation omitted .)) . The reason '~for theinonbenef iciary settlor's~i.nability to sue the trustee to . enforce,'the terms of the trust is the absence of a contractual relationship between the settlorand the trustee . See 3 Scott, supra at 191-193 ; Gaubatz, "Grantor Enforcement of Trusts : Standing in One Private Law Setting", 62 N .C . L . Rev . 905, 909- 1912 (1984). Rather, the trustee's fiduciary obligations ar e z? . .continued ipheld.the termination fee to be currently deductible . In so, doing, we distinguished INDOPCO, .Inc . v . Commissioner „503 U .S . 79 (1992), which requires the capitalization of fees that provide ) harmed rather than benefited the taxpayer . For that reason, w e Ila benefit to the taxpayer extending beyond the taxable year in Id . at (slip op . at '51) . In effect, .our finding of issue . no benefit to the taxpayer treated as irrelevant the obvious financial benefit to the taxpayer's shareholders who stood, in relation to the taxpayer, as the beneficiaries of the shareholder trusts stand-in relation to those trusts . 45 - generally considered to'run to the ben ficiaries, providing the beneficiaries with exclusive rights of enforcement against th e trustee . See 1 Restatement, Trusts 2d,1 secs . 197-200 (1959) 9 Scott, .supra at 209, . 211-212 . Both Georgia and Ohio=law appea r to be consistent with that precept . 12-193 (2003) ; Ohio Rev . Code Ann .'sec (2006) .2 8 Assuming that Mr . .Cox or his repr without standing to sue to enforce the terms of the shareholde r trusts and that the trust beneficiari e would benefit from ! and be 28 There are indications that the udicial bias agains t enforcement of the settlor's intent ma Scott, Trusts 218 (4thed . 1988) . ("Th e courts has been to lay an increasing enjphasis on the functio n the settlor .") . Fori, the court in carrying out the wishes of commentary questioning universal applic settlor enforcement of trust terms, see Enforcement of Trusts : Standing in One N .C . L .,Rev . 905 , 906 (1984) : be softening . See ;'3 tendency of American ation of the rule agains t Gaubatz, "Grantor Private Law Setting " A-grantor who creates a spendthrif trust relies on the trustee to res of the beneficiary to deviate .from immediate advantage . If the benef deviation, his desires are contrar grantor, even if not contrary to t interests . The attempt thins raise grantor's right to prevent the tru the beneficiary's demands . [Fn . r t or material purpose! ist the importuning s the trust to his iciary seeks suc h to . those of the ' e grantor's economic the question of the ! tee from acceding to'! f . omitted .. ] See also Note , " Right of Settlor To Enf Harv . L . Rev . 1370, 1376 (1949) : rce a Private Trus t But there are some indications, at least in the case ofi, spendthrift trusts, of a policy to give the settlor's intention affirmative effect against an unwilling trustee . Where this * * * policy is present, the settlor should be allowed to enjoin unauthorized payments of income or principal, a id, whereve r feasible, to-follow the property i to the hands of the payees'and reestablish the trust . [Fn . refs . omitted .] . - 46, - in favor of any gratuitous transfer of trust assets to the family partnerships, that gratuitous . .transferinonetheless would be harmful to the shareholder trustsl! As noted supra ,'it would necessarily diminish trust principal and income and, therefore , it would necessarily diminish the, ;economic well-being of the shareholder trusts, irrespective of Mr . Cox's right ( were he alive) to enforce the terms of those trusts . In short, the lenhanced benefits to the trust beneficiaries arise at the expens e of the' shareholder trusts . ; (b) Conclusion ;j KTVU, .Inc .'s assumed gratuitous transfer of an interest i n KTVU Partnership to the family partnerships did not benefit the d6 i~ shareholder trusts . (3) Conclusion Concerning Application of the Primary Purpose Test - tKTVU, Inc .'s assumed gratuitous transfer of an interest in KTVU Partnership to the family partnerships does not satisfy th e primary purpose test as set fort1- in Sammons v . Commissioner , 47 2 F .2d,449 (5th Cir . 1972), and Stinnett' .s Pontiac Serv . .i,lInc v . Commissioner , 730 F .2d .634 (11th,iCir . 1984) . 3 . Conclusion ; KTVU, Inc .'s assumed gratuitous transfer of an interest in KTVU Partnership to the family partnerships did not constitute a II! distribution to the shareholder trusts subject to sectio n 311(b) . 29 47 - An order rantin etit!io her, s motion f r summary ud ment wiil l be issue . - j 29 We note in closing that, were respondent able to establish .that (1) petitioner, KTVU, Inc ., KTVU Partnershipqland the family partnerships were all under common control, and (2) the allocation of income and liquidation (or sales) proceeds'j among .KTVU, Inc ., and .the family partnerships was unreasonable (i .e ., it did not reflect their true taxable incomes according to their relative contributions to KTVU Partnership), circumstances that, in fact, he . alleges, the Secretary has authority under;Hsec . 482 to allocate income and deductions among related partners1to clearly reflect income . See, e .g ., sec . 1 .704-1(b)(1),(111 ), (" .[A]n allocation that is respected under Tax Regs . r section 704(b) and this paragraph nevertheless may be reallocated under * * * section 482" .) . We are not called upon to review the Secretary's exercise of his authority under sec . 482 in the icase before us . It may be that respondent's decision to proceedi against petitioner under sec . 311(b), rather than against the partners in KTVU Partnership under sec ._482, is attributable") at least in part ; to the fact that the latter approach would not have resulted in an immediate tax on the entire $56,182,115 deemed gain attributable to the assumed transfer of partnership interests in KTVU Partnership by KTVU, Inc ., to the family' partnerships . Instead, because KTVU, I c ., and the family . partnerships were all domestic taxpayer 3, a reallocation of KTVU Partnership's income among them most lively would have resulted in little, if any, additional tax in 19 3 and the followin g years . 48, - APPENDIX Ii 1 Atla nta Trust s Atlanta . Trust I ACC !ha's,life estate , remainder to her lineal descendant s Atlanta Trust II BCA has life estate , remainder to her lineal descendant s 29 0 Shareholder Trust s '4f , Dayton Trust ACC & BCA .have lif e estates, remainder to their lineal descendant s 290 40 0 Cox Enterprises, Inc . CC I ' 1 0 KTVU, ,, Inc . 55/75% of profit distributions certain KTVU TV station assets (9/1/93) . - Y .KTVU Partnership . $31M 22 .5/12 .5% (9/1/93 : $27M) of,,profit (9/12/96 : .$4M) distribution s I 22 .5/12 .5°% $31M of profit (9/1/93 : $27M) distributions (9/12/96 : $4M ) ACC Partnership (ACC-owned entity & ACC' s children) BCA Partnership (Entities controlled by BCA & her children ) "Family Partnership s II