United States' Motion to Exclude Expert Testimony of Plaintiffs'

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ANALYSISINTRODUCTIONDubinsky's "OPINION NO.1" is thatBeal's so-called "investment" strategy wasin reality a pre-planned, permanent taxelimination strategy involving the use ofdigital foreign currency "swaps" as anartifice to generate artificial paper taxlosses. The so-called "investment" strategylacked true economic substance. (Dubinskyat 3.)Dubinsky gives, as the "BASIS FOR OPINION NO.1," a list ofeight assertions, as follows:1. Explanation of the Deal (Id. at 3-15)2. The Long and Short "Swaps" in Substance Should Be Viewed asa Single Economic Transaction (Id. at 15-19)3. There was No Reasonable Opportunity to Earn a ReasonableNon-Tax Profit From the "Swaps (Id. at 19-21)4. (Bemont) Lacked Any Non-Tax Business Purpose that Could NotHave Been Fulfilled by BPB (Id. at 21-23)5. Montgomery's Pre-planned "Partnership" Interest in (Bemont)Had No Real Economic Substance (Id. at 23-24)6. Beneficial Property's "Partnership" Interest in BPB Had NoEconomic Substance and Only .Served to Make Beal' s TaxLosses Less Apparent on His Tax Returns (Id. at 24-26)7. There Was No Apparent Business Purpose in (Bemont)' sPurchase of 165,000 Shares of Solution 6 Stock (Id. at 26-27 )8. Beal's Tax Strategy Was a Pre-Planned Series of Tightly-Choreographed, Interdependent Financial Transactions Wiredin Step Fashion, With All the Characteristics of a Son-of-Boss Transaction Described in IRS Notice 2000-44 (Id. at27-31)- 3 -
(BM Investments LLC, was subsequently renamed Bemont InvestmentsL. L. C. Dubinsky's convention is to refer to this entity as"BM." As I did in my original report, I will refer to thisentity as "Bemont.")Dubinsky does not state, and the reader is left to wonder,whether (1) the eight assertions that he designates as the"BAS IS FOR OPINION NO.1" are all necessary to support hisopinion, (2) the assertions are al ternati ve bases, anyone ofwhich is sufficient to support his opinion, or (3) someintermediate position where more than a single basis but fewerthan all eight bases are necessary to support his opinion.As Dubinsky offers no indication regarding how the listedassertions fit together to support his conclusions regarding"preplanning," "artifice," and lack of "true economicsubstance," it is not possible to evaluate interrelationshipsbetween or among them.I will therefore treat Dubinsky'sassertions independently.Item 1 in Dubinsky's list, "Explanation of the Deal," ishis recapitulation of the facts.I do not comment on this partof his report except in those instances where his version of thefacts implicates one of the bases for his opinion.- 4 -
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UNITED STATES DISTRICT COURTEASTERN
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of the transactions in order to com
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Expert ReportOfDavid A. WeisbachUni
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c.v. is attached as Exhibit A. I am
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The background for the rules allowi
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which provide a general defense aga
Page 15 and 16: 2000-44 transaction. Without expres
Page 17 and 18: for the potential tender offer of S
Page 19 and 20: In particular, it is my understandi
Page 21 and 22: taxpayer wil prevail on the merits
Page 23 and 24: APPENDIX - DOCUMENTS REVIEWEDDescri
Page 25 and 26: DAVID A. WEISBACHUniversity of Chic
Page 27 and 28: 143-151.Paretian Intergenerational
Page 29 and 30: APPENDIXList of Prior Expert Testim
Page 31 and 32: QUALIFICATIONSI am an Associate Pro
Page 33 and 34: dollar-US dollar exchange rate duri
Page 35 and 36: facili tate the pursuit of a tender
Page 37 and 38: Beal's and Montgomery's formation o
Page 39 and 40: "-"~-_._.~-,----_..__.._._.__._--_.
Page 41 and 42: LOAN PREMIUM VARIATIONThe loan prem
Page 43 and 44: premium variation, but the second a
Page 45 and 46: Beal and Thomas Montgomery stated t
Page 47 and 48: was planning to acquire. Sanding al
Page 49 and 50: irelationship cannot be eva~uated i
Page 51 and 52: To summarize, Notice 2000-44 descri
Page 53 and 54: IRS and Treasury sometimes refer to
Page 55 and 56: swaps in BPB (as opposed to within
Page 57 and 58: APPENDIX AETHAN YALECurriculum Vita
Page 59 and 60: ETHAN YALEVitae, Page 3PUBLICATIONS
Page 61 and 62: APPENDIX BDescriptionBa tes NumerMa
Page 63 and 64: IRS Information Release IR 2004-64,
Page 65: PURPOSE OF REPORTThis rebuttal repo
Page 69 and 70: espect to a potential tender offer
Page 71 and 72: premises if the "transaction" refer
Page 73 and 74: e a payoff of at least $552.5 milli
Page 75 and 76: WAS BEMONT FORMD FOR TAX REASONS? W
Page 77 and 78: (Montgomery Deposition at 516:25-51
Page 79 and 80: his case (by showing that admitting
Page 81 and 82: case. Another set of e-mail message
Page 83 and 84: made in Australian dollars, for the
Page 85 and 86: 3. failure to treat the short finan
Page 87 and 88: CONCLUSION OF REPORTThere are signi
Page 89 and 90: DescriptionDeposition of Margaret M
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United States' Motion to Exclude Expert Testimony of Plaintiffs'

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