Free Proposed Findings of Uncontroverted Fact - District Court of Federal Claims - federal

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 1 of 39

33

i proceeding has no bearing on the question before the

2 Court. 3 THE COURT: Well, I'm not going to say
4 absolutely no to that. If there is any ambiguity in

5 the tax code -6 7

MR. KATER: Of course.
THE COURT: - - or regulations, it could be

8 relevant possibly what has occurred in other cases,

9 but I'm not going to prejudge that.
10

MR. KATER: Of course.
THE COURT: We will see how that plays out.

11

12 So let's keep the brief ing schedule that I spoke about

13 and if the government sees a need for discovery, which 14 may involve just maybe a phone call, can you give me

15 the following information, A, B, and C, maybe we can

16 do it that way. We'll deal with it at that time. But
17 I want them first to see your motion and then we can

18 go forward from there.
19

MR. KATER: Now, maybe Mr. Bassin would be

20 agreeable, I don' t know, but I would at least raise
21 the issue of how we handle the scheduling as to other

22 aspects of this case. We do have a response date due.
23 I appreciate your generosity in extending the

24 deadl ine .

25 The discovery requests were quite extensive,
Heritage Reporting Corporation (202) 628-4888
59

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34

i but he's been very gracious in taking that into
2 consideration, and the question now is does Mr. Bassin
3 have any obj ection if we were to address this question

4 first, put that on- hold, deal with the resolution of

5 this question, and then resume. We have no objection
6 to any appropriate extension along those lines.
7

MR. BASSIN: Your Honor i we have no

8 obj ection to staying- other proceedings provided that

9 we all recognize that the deadlines established by the

10 Court's earlier scheduling order are going to have to 11 be revisited once this jurisdictional matter is 12 reso1 ved.
13

THE COURT: Well, I think that it makes a

14 lot of sense to suspend other proceedings for the time

15 being until we get this jurisdictional issue resolved. 16 And so in the order that we issue later today or 17 tomorrow we will provide for that.
18 19

MR. KATER: Very good, Your Honor.
MR. BASSIN: Your Honor, the only other

20 question I had, and I have not quite looked all the 21 way through the rules yet, but on motions to dismiss
22 and for summary judgment I though the briefing

23 schedule was a -- it was a 28-day period.
24

THE COURT: Well, you could be right. Do

25 you want that much time for this? I mean, can't we do
Heritage Reporting Corporation (202) 628-4888
60

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35

i it more expeditiously?
2

MR. BASSIN: Why don' t we see what they do,

3 and I suspect we will be coming to you. I know we're
4 not going to get it done in 14 days, and we'll be
5 coming before you and we'll tell you what we propose

6 in terms of the schedule.
7

THE COURT: Well, again, it seems like it

8 ought to be pretty simple, and I want to move it

9 along. We're not going to take months and months on

10 this.
11
12

MR. BASSIN: Oh, of course.
THE COURT: So we'll set up the schedule as

13 described, 14, 14 and seven, and then you get in touch 14 with us after the motion comes in. Is that
15 acceptable?
16 17

MR. KATER: Yes, Your Honor. Thank you.
MR. BASSIN: Your Honor, we'll see where we

18 are in 14 days. I understand your desire to move this

19 along.
20
THE COURT: You know, many motions for

21 summary judgment involved, really involved complex

22 sets of facts. I'm not saying where this one falls.

23 Because it's sort of in the middle of everything else 24 that's going on, I would like to keep to a quick 25 schedule if we can.
Heri tage Reporting Corporation
(202) 628-4888
61

Case 1:05-cv-00738-TCW

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36
1

So if there is nothing further today, we i 11

2 stand adj ourned. Thank you very much.
3

MR. KATER: Thank you.

4 (WhereupGn, at 11:02 a.m., the hearing in
5 the above-entitled matter was concluded.)

10 / / 11 / / 12 / / 13 / / 14 / / 15 / / 16 / / 17 / / 18 / / 19 / / 20 / / 21 / / 22 / / 23 / / 24 / / 25 / /
Heri tage Reporting Corporation
(202) 628-4888
62

6// 7// 8// 9//

Case 1:05-cv-00738-TCW

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37

1

REPORTER'S CERTIFICATE

2
3

DOCKET NO.: OS - -i~ g T .
CASE TITLE:~(~ f,V\/U;~ ~).1. llI~!&
HEAING DATE: 2/i1l 00 l ~ ~_. - .

4 5 6
7 8 9

v- ~ Sf~ ( /)".~~;i ·
VV o.u , v-. ~Ö '-' (D. C

LOCATION: lA, ~ÅMMl;

I hereby certify that the proceedings and evidence are

contained fully and accurately on the tapes and notes reported by me at the hearing in the above case before the

11 Ll. S. ~ cf F ~~ C£~Y\V.
12 13

10

14

Date: 3/2 q 100

15
16

17
18

12V'~ k1 Official Repo:~
Heritage Reporting Corporation
Suite 600

19

20

1220 L Street, N.W.

21
22 23

Washington, D.C. 20005-4018

24

25
Heritage Reporting Corporation (202) 628-4888

63

Case 1:05-cv-00738-TCW

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, ..
Plaintiff's Exhibit

: 'Dåtë:d 'Augusf3'1;-2Ö06 .

Dale Barker;-VicePres'ident of North America, Inc.' SFI Waste Systems

15880 N. Greenway-Hayden Loop, Suite 100 Scottsdale, AZ 85260
Re: Rev. Proc. 2002-43: Designation bY.Group Members under §1.1502-77A(d)

Terminated Common Parent: Browning-Ferris Industries, Inc., EIN: 74-1673682 Desianated Substitute Aaent: BFI Waste Systems of North America, Inc.

EIN: 41-1696636
Tax Years: All consolidated return years ending on or before December 30,2004
Dale Barker:

We have received the Designation by Group Members, filed pursuant to section 8 of Rev. Proc; 2002-43, designating BFI Waste Systems of North America, Inc. for the

consolidated group whose common parent Browning-Ferrs Industries Inc., has terminated.
.dnaccordance with section 8.05 of Rev. Proc. 2002-43, this is to inform you that the designation is approved as of August 31, 2006.
If you have any questions, please contact Michael Ouchi, Revenue Agent, at

(801) 620-5027.

SZ4~
Dan G. Hammer
Ogden, Utah

Chief, Planning and Special Programs

fi,:, o'EP "
( ii::'", 20(76
'\(~ K:a,'tll;'p ,., £'"..1)
\ ';') -. ~i;l "J

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~.(è.~"~"'ú-V / ;:ip ,,~ . ,., Ç)... ;/
. (. :.rc,'~,::.0.!

EXH -18

64

Case 1:05-cv-00738-TCW
Case 1:05-cv-00738-TCW

Document 36-2
Document 1-1

Filed 11/22/2006

Page 7 of 39

Filed 07/08/2005

Page 11 of 190

Fo

(Re. Oe 204)
Nam

1120X
Brownino-Ferr is

Dor1ii .... Tr...ui _ R-- Seic
Please
lYl=t:

Amende U.S. Corpration Income Tax Return
Industries Inc.
,.

OM No. 154132
For ta yar ending

~

9/30/97
tetermc MC var.)

Subsidiaries
100

Emr __ nube
74-1673682
-

..

,::''''~'. ;".::-.:ct, à:iC rC~:iì'. VI ~;.ji~ .:... (I: a P.O. L,v.l. ;.o,c. 1;~:'~iÂ~;~.$.)

Prt

or

15880 N Greenwav-Havden Loop Cil or -i. slal. an ZI co Scot tsdale AZ 85260

Suite

_ .. _.. _ _TallI(o¡l)__.
480.627.2736

E~ name II .dd'.. us an orgl i-n (I sa as a_. wrle .Sam')

Browninq-Ferris Industries, Inc. ,. Subsidiaries, 757 N. Eldridqe, Houston, TX 71019 Internal Revenue Serice Center ~ whre orna retur was fl ,. Austin, TX

Ii
1

Fil

In applicable items and use Part II on th bak to explain any changes

Incoe and Deucton (see instrctions)
1

re ad pn at..
4
4

(.. Aa oily
389

lb Ne ch Incao.. (chae)ein .. Pa .
0

(e) CO..'c1 amo

Tot inc (Fon 1120 or 112o-A, fi 11) . . . . . . .
Tot deuctions (total of Hoos 21 and 29 Fon 1120, or Hnes 23 and 25c Form 112o-A) . . . . . . .. . . . . . .
Taxable income. Subtract line 2 from One 1 . . . . . . . . .
Tax(Form 1120.llne 31, or For 112Q-. goo 27).. .

800 14 9

4 389 800 149

2

2

234 964,403

80,923.602 4.,315,88B 005
(80,923,602 (18,549,092
° 0

3

3

154,835,746

13,912,144
24,235 565

4

Payts and Creit (see Instrclons)
58 Overpyment In pr year alloed as a credit. . . . . .

-_.
d

4
Sa
151

42,784.657
0

0

b Esmate ta payment. . . . .'. . '. . . . . . . . . . . . . . . c Refund applied for on For 4466...............

5c
5d

Subtr fine 5c fr the su of lines 5a an 5b. . . .

102,500.670 32 709,291 69,791,379
° 0 0

0

e Tax depsitd with For 1004 .... . ........ .. . . f Cred from Form 2439. . . . . . . . . . . . . . . . . . . . . . . 9 Credit fo Federal tax on fuels. . . . . . . . . . . . . . . . . .

5e
Sf ISa

0 0 0
a

102,500 670 32,709 291 69,791,379
0 °
0

6
7

Tax deposited or paid with (or anar) the fili of

the oriinal return

.......~.............

6
7 8
9

19,079 2B6

8
9

Add Unes 5d through 6. coumn (c) . . . . _ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overayment, if any, as shown on orinal return or as later adsted . .....0.. 00' .... 0"

870,665 46,086,008
88

Su lin8 frm fioe 1 "" .... ... . ..... ... .. ... .... .. ............. ... ...... ...
if paying by chec, make It payable to the "Uited

42.784,651

Tax Due or OVernt (see InstNctons)
10 Tax du. Subtct line 9 fr Une 4. coln (c).

Stes Tre" . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . ." 10

°

11 Ovnt Subraclline 4. column (c). from line 9 ................................... 11 18 549 092

12 Enter the amount of line 11 you wanl: Crll to 20 es tl .. Rend" 12 18 54 9, 092

Under panaa of pe, I .. .. I hiw mad 00 origin rem an 1I I hi ..am ii .. rewm in *"pang

Sign Here
Paid

~

(ot olnpa d a Inb or wllc ",.paer ha 01 Ilge. S/,J6S
Dale

scheule. an $tte best 01 my la and bel, ih eireIm Is In. 00 and colete. De 01 prep

~ TI (¡ P
Piepfls SS Dr PI

Ilte

Prpares
Us Only

\l . _ iip co , _sa se--l.
FI's name (or t.
Form 1120X (Rev.

For Prai: Ac and Pape Reon Ad Notø, see page C.
ST FE04.'

IS

12.2004)

~ GOVERNMENT

i EXHIBIT
65

I ~

Case 1:05-cv-00738-TCW
Case 1 :05-cv-00738- TCW

Document 36-2
Document 1-1

Filed 11/22/2006

Page 8 of 39

Filéd 07/08/2005

Páge 12 of190

ii Ei of a. to Itms n Part I (E th Ine numb fi pa 1 fo th Item yo ar
on page 3 of th Ins.)

"" 1-fl.1M ,. 2
ctlng. an gi th ni fo ea change Sh.an coIon In det. Al, se Wh To Atch

CeCIlmonpaS,anchecti . . . . . . . . . . . . . . . . . . . . . . . . .~ (t
.................. .--..._.._--_........_--........_---................_---........_-_........._--..... -_..................-..... --- .... ---.. ....._--- .."'- .._-._... ......_.. ...._...__.................

If th chge is Que to a net operai io caryoack, a capita/loss caba or li ¡,.i..ii Uusles cr.i "drl)'úai(, So

Total Oe'ic. (l 2) In duo to an acl1 op 10.. çairac fro Ui ta

..yi im July 30, 1B1 PI,.rw 10 Att I for an eicn ci ti i:eln Tot Deuc
-...............--...--..--..-......-.....--.-..-.---..----........... ......-.......- ..- -_....----....-----.----.... ...... ........ _.._- ..........._....-...........-.... ........_ ....... -.._..e.
-.. .......................... _......_-............._.........._-......_--.. ............. _. ...-. ........ ..-.........._-_.. ...._............ ..__.............. ..... ............-...............-... ..-......._......_............

Tax ii. (l I) ha de cl to tM adn" ne opng Io can Incud IIlle 2
." .._.............. _....-.... _..- .......-........_...._..-..- ....................._...- ........__....._-.--_....-..-..~ .....-.. _...... _..._...-.... ..... ....._---. .....-_.. ..-

.. up/r abve. ...._...._.........................._--._--...._--_........_......................-..-.._...................................................................._--..._..._-_.._.......
...._... ...................- ......--.......... ..... ._...........-......._--.................._..__................. _.- ..........._.......... _....................._-_.........--...-................ .....-

. "'Federlime Tii (li 4) ba ci du to ti li net op lo ca .. ei ab

.......__..........-......._.._................_....._.-..........._-_.._.-....-.............._-_.._......-...................................._--.........._............_......................_-..
................._.........._...__.... ................_..._...._..-...................................._........................-........................................._..-......_....-.._...__.......;.

...._. ...._.........- ............ ...._..............._....... ............. _.....................__.._...........-......~..
.-....-... .............................................._....- ...._. ..__.._.... ...... .....-...---....-.......................-..

:-.............._......... _.... ...._..........._..... .._.._.. ........__...... .... .._............_--..._.. .......__.-........_..... ....... ......... ......-.........._....................... .............................

......-........--_.-........_.._.................-..._..-........_-_...-..................._........-......__...-..-_...._-....................................-...................._-..-.._.._.._.........
.. ........-..-.--_.......... ........-...._-......... ..............__...._........ _.............. ..... ............................... .....- --... ....... ............... .............................._.................._..............
....-..................._.... .._.........-.... .._- ........._.....-.........-.............. .-.. ...._.... .........-...... ...... .......... - ..... ......_...... - ........_-_................. ........... - -.. -.. .........._.................._..:....._-

.... ......- ............ ... ..... .-.... _.........-......._...........__..-........................... ...._.................. ..--.... .._.._-............. ........._........ ...... ...... .._-....-....- ....__.. ...........-..........

.......... .............. -....--__...........e......................_......_..__.......__......__..............._ ......._..._...._................. ............................._.....__........__.... ..........._.....

.... -.. ._............._.._.._..-.........._--......_--............_....-........__..........-.._........... ..............._.............e. _.........._.. __"_ ......_. .......e...__..__........._ ..__ ..................... ......... -.._...._........_ ._e................... _..e.._..................... .._. ....._............._.............._......... .................. ......___ _.. ......................_..__
::'"~. ..~_...._ ...__....e_....__...... ......... ._......___......_ .......~........ ....... ......_......__....._......... ..._.. ...._......_......_...........__. ..........__..__..__..._. __.......... ........_

. 7'............. ...~........_........... -..-....................--.._--............-........ ......-...._.....__..._.. _e_... .._........... ........._......._..................._.............................
. ':."- ....-.. --:.. ..e......._.... ._...... .._..............._. _......................e....................._........__............. ..............._....._ ............... ..... ..._..__.............__.... 0-. .....__ __................._...
'! --:-- ....._.... .................... .............._.......... ._........_...._....._..........._....-...................._................-............. ........-.. .......... ...............................-........ _.............-.........

........ ....-.............-.......---..............-....---................-.... -...... .....-.......... -.. -........._.............. ....e............__ ___.... ..__...._____...._....... .......... .._............. ..... _...
.................._........- ...........................................-.-..........._.............. -_.. .................. .--..':......_.. ..... .............._..- .........._..-....- ...-............. ....... .................. ....- ......

'. ,

'fG 1120 fl. 1l-ø

66

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Case 1 :05-cv-00738- TCW Document 1-1 Filed 07/08/2005 Page 13 of 190

BROWNG-FES INUSTRI, INc. & SUBSIDIAR
EMPLOYE IDENTCATION NUMER 74-1673682
9130/97 FORM t 1iox EXPLANATION OF CHANGES

.iNliM vi/ A.nACHM..iA~lS

Explanon of Chages
2 As Amended Schedules
3 IRS Audt Statemen (Form 3610)

4 IR Exainon Reprt (Form 886A)
5 Copy of 713

0/99 Cla for Refu (Form llioX)

67

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Case 1 :05-cv-00738- TCW Document 1-1

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BROWNING-FE INUST INC. & SUBIDIAR
EMPLOYER IDENTFICATION NUER 74-1673682
9130/9 FORM i 120X EXPLANA TTON OF CHANGF.S

A'IT ACIfNT i
The bases for the cha reues in this clai for refid ar set fort below.
The tenn "Claimt" as used herein refer to Brownng-Fers Inuses, Inc. and th members
of its consolidaed group as appropriate. Unles otherse indicated seon ("§") refeences ar
to the Internal Revenue Code of 1986 ("IRC"), as amened, as in effect for th yea in issue.

Bas on the chanes set fort below, Clamat is entitled to a refud of $18,549,092 or such

gr amount as. is legay ~fule. i addition, Claimat asse th it is entitled to all
corrlative an computaonal adjusents and consuenti changes to any items (including,
but not lite to, its alteve miwn ta envirnmenta ta, net operang loss deductions

an net ope loss caac an carover, capita los dedtions an cait loss
carbacks and caovers, an ta crits and tax crt carbaks and caovers) affectig

ths ye0 Clai~t also reue a ref of all related inter, peties or additions to ta th
have been oveipaid. Claimat al reuets statory interest on any overpayment as provided
by law (including, but not lited to, the benefi of offsettg, intere netng, an the net interet

rate of zero on peod of overlaing widerpyment and overayments).
Clat incwr an aggregate caita los of $901

,660,007 on the sae by cer

members of Claiants conslidated reur group (here refer to as the "BFI Entities")
of Class B Common Stock in si liabilty managemnt companies, as shown on attached Exhbit
I, to unlate investors dwi th table ye ended July 30, 1999 (the "1999 ta yea").
Claimat is entitled to off th caita loss against caita gai net income of $80,923,602 in

the 199 ta year and, as a ret, is entled to an additiona net opetig loss caback frm
the 1999 ta yea to its table yea endin Septebe 30, 1997 (the "1997 ta yea") in the

(.(

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amount of $80,923,602 or suh other proper amount as provided by law. Ths rests in a

reducton in Claimant's taable income for the 1997 tax year in the amount of $80.923.602 or
suh oth prope amount as prvide by law.
On July 30, 199, Alled Waste Induses, In. ("Allied") acuied substatially

all of the outs stok of Clait Pnor to the acquisition, Claimt utili a large in-

hous st to mae th lilities aring frm its opetions. In contrt, Alied utilze a
small in-hous st an outsur most of its envinmental magement, risk mangement
and other exrtse.

In July 1999, shrty before th clos of

the acuisition, Claiant restctured th

magement of its cotingen liabilties in a lner consistnt with Alled's outsuring
appro and to prvide a legal stctu th woul foster the effective maement of the

liabilties. As a relacment for Claiant's heaviy staed inern depaients Claiant
establishe six sepa liabilty manement compaies based on the specifc expertse needed

for th mangement of th liabilties and compliance with applicable regulatory laws, as shown
on Exhibit 2. In order to conslidate the liabilties into the corrpondig liabilty maagement
compaes, th BFI Entities contrbut cert note in an aggrgae amount of $902,561 ,661 to

the liabilty magement compes in exchge for (i) Clas B Common Stok, and (ii) the
assuption by the liabilty maagement compaes of contingent liabilties in the agregate
amunt of$901,660,OO7. The abve tranacons werta.free exchanges purt to § 351.

Each of the BFI Entities then sold their sha of Cla B Common Stok to
envinmenta and insurce consultats with considerble expertse in the liailties managed

by the respetive liabilty manement company (herinaer referr to the "Consulting
Invesrs"). See identities of Consulting Investrs at Exhibit 2. Th ownerp of the stok

I. ';

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provides an equity inceve for th Consutig Invesrs to aggressvely identfy and tae

advantage of cost-saving opportnities in maaiiing the liabilities.

The aggat amount reaizd by the BFI Entities on th sale of the Class B

Coon Stock durng the 199 ta yea wa $901,654. The BFI Enties' ta bais in the Clas
B Common Stock wa a substtute bas equal to the su of the ta bais of the propert which

the BFI Entities contrbut to the liailty manement companes an unduce by the

liailty maemen compaes' asumpton of the liabilities in acrdce with § 358. As
shown on Exhbit 1, the BPI Entities' aggat tax basis in th Clas B Common Stock wa

$902,561,661. §e liabilties do not reuce stock bais beuse they ar exclud under §
357(c)(3) an therfore, § 358(d)(2) apli~ Alterntively, Ee libilties ar not taken into
acwit uner § 358(d) beus such contingent liabilties ar not "liabilties" for feder income

ta purseJ Consuently, as shown on Exhbit i, the BFI E~tit~es' sales of the Cla B
Common Stok resulte in an aggate caital loss of$90I.660,007 in the 1m ta yea.
..L__...',-..,;...,:;.....

Claiants deucton of th capita loss resulting frm th sale of the Class B
Common Stok durg the 199 ta yea was disallowed by the Inter Revenue Seivce's (the
"Service") exanation te The disalowace oftbe capita loss is reflected in Issue 71 of

the

Examon Reprt date May 3 I, 2002 and reise Septmber 3, 2002. The disaowan of

~

the caital loss is incrrt and withut merit. Clait hereby incrpra by reference al
documents, letts, schedules, exlanons, protests, and other corrpondence on ths ise
sulid to the Service.

As a reslt of the changes herein, Claimats ta liabilty is reduce by
S 18,549,092 or such grter amount as is legally refidable.

1.3

70

Case 1:05-cv-00738-TCW
CBse 1 :05-cv-00738- TCW

Document 36-2
Document 1-1

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FORn 1120X (Re. Demb:2) 0I R.. Tr...ir _ oIl1 Son

OND No. 154&-132

Amended U.S. Corporation
Income Tax Retrn

~ 9/30/98 (En ninl an

For ta yea enin

Pl
Type

Name

Emr Id i74-1673682

Brownin -Ferris Industries Inc. & Subsidiaries
Numbe. steet. an 100m or su no. (If a P.O. bo see InlrOf.)

or Plnt

15BBO N Greenwa -Ha den Loo Suite 100

Ci or to slte and zip co
Scottsdale AZ 85260

Telepho numb (opt)

480.621.2736

Ent name an adni us on onl re (If _ as abo. wn 'Sa')

Browninq-Ferris Industries. Inc. & Subsidiaries. 757 N. E1dridqe, Houston. TX 77079
Inlemal Revenue Serv Center il

where ornal return wa fi , Austin, TX

l1

Fill in applicble it and us Part II on the back to explain any changes

Income and Deuctions (se instrctions)
1

.. ~
(a As ory
46

Cbl In_Ne ch ~l0

(el Coac amunt

2

Total incoe (For 1120 or 112o- Dne 11). . . . . . . Totl deucns (total of lines 27 an 29c, For 1120.
or lnes 23 an 25c, For 112o-A) . . . . . . . . . . . . . .
Taxable Incoe. Subtract Rne 2 from lne 1.... .... .

4.409,436 eez
3.948,907 315
460,529,567

4.409,436
3

B82

2 3 4

0 0

948,907 315

3 4

460,529,567
56,438 081

Tax lForm 1120. line 31ar For 112O. One 27) . . .

66.149,601
086. 008

(9,711.514
0 0

Payments and Creit (se Instrctons)
Sa OVerayent in pror year ano as a cred. . . . . . b Estimated tax payments. . . . . . . . . . . . . . . . . . . . . .

Sa 5b

46 086 008

100.000 000
54 584 807

100.000,000
54 584 807

c Refund applied for on Fòrm 44. ... .. . .. . .. .. . d Subtct line 5c frm th sum of li Sa and Sb. . . .

5c
5d

91,501,201
0 0 0
............................. ..

0
0 0
0

91,501,201
0
0

e Tax deos wi Foi 7004 .. .. . . . . . . . . . . . .. f Credit frm For 2439. . . . . . . . . . . . . . . . . . . . . . .
9
6 7
8
Credit for FedøraltaKOI fuels..................

5e
5f Sa

0 6
3

0

Tax desied or paid with (or after) the fiUng of lhe orinal return

519.979
021,180

Add lins 5d through 6, comn (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overpymnt if any, as sh on orin rern or as late adusted ........ e............ _.......

7
8

95

2e 811.579

9

Subtr lie 8 fr Une 7 . . ......,. .. .... ... . .. .. . .,. .. . .... ..... . ... . .. . .. ... ...
paying by ch. make It payable to lhe "UIte

9

66 149,601

Tax Due or Overpayent (se Instrctions)
10 Tax du, Subtract line 9 frm line 4, coumn (e). If

Stte Treasury . . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . . ." 10
11

o

Overpme Subtrline 4, comn (e). frm line 9 ................................... 11 9 711 5 U

12

Enter tt amount of li 11 you wa Cr to 20 esti ta ~ Refnde'" 12 9 711, 514

Uner penall d pe. I lI I have ii an cial..tu ii.. I ha ""1n Ih Iirr ",tu. R:ud llnylli scdule 1100 sil_is. II be 01 my Il and be. IH a.. re Is lr. co. ii coe. Delln of pteper

Sign
Paid

(011~i pe) of wt pre''' ti -i kn
Preni. ~
a1natue ,

Her
Pr. SS or PTN

Prre15
Use Only
!S
STF FE04298F.l

FI's i- (or ~
.dd In ZiP

yoni if se-elo). ,
Form 1120X (Re..12-20)

For Priacy Act and Papen. Re Ai Noce. see page 4.

~ GOVERNMENT :I
71

i
i

EXHIBIT
In

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 14 of 39

Case 1 :05-cv-00738- TCW Document 1-1

Filed 07108/2005 Page 114 of 190

Fo 1120 (Re. t2-a) Pa 2
.- Exanan of Changes to Itms In Part I (Enter the line numbe fr pae 1 for the its you are
chnging, and give th ren fo ea chane. Sho any computan In detR. Also, se What To Attch
on page 3 of the incts.)

If Ih change Is due to a net operti loss caba a catal loss carr, or a gener buin crit cack, se Caba Clon pae 3, and ch hEl. .. . . .. . . . . . ".. . . . . . . . ... . . .. . .. . .. . . . ... '" . _ . . . . . .. ~ 0
Federal

Ince Tax (lne 4) de due to a Pri Year Minimum Tax Cre attbutable to th table

year ened Seembr 30, 1997. Plas reer to Attchment 1 fo-an exanati of th chnge in table

incoe and ta

S' FE.2

Fo 1120XlRe.12-2Q)

72

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 15 of 39

Case 1 :05-cv-00738- TCW Document-1-1 Filed 07/08/2005 Page 115 of 190

BROWNING-FERRS INDUSTRS, INC. & SUBSIDIAES EMPWYER IDENTICATION NUER 74-1673682
9130/98 FORM 1120X EXLANATION OF CHANGES
INEX

OF A'IACHNTS

Explanation of Chages
2 As Amended Schedules
J IRS Audit Stateent (Form 3610)

4 IR Examation Report (Form 886A)
5 Copy of7r30r99 Claim for Refud (Form 1120X)

73

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 16 of 39

Case 1:05-cv-0073B-TCW Document 1-1"' Filed0710BI2005.. Page 116 of190

BROWNG-FERRS INUSTRES, INC. & SUBSIDIAR
EMPLOYER IDENTIFCATION NUER 14-167368
9/30/98 FORM 1120X EXPLANATION OF CHGES

AIT ACRMNT i
The bas for the chages requeste in ths claim for refud are set fort below.

The term "Claimat" as us herein refers to Brownng-Ferrs Industres, Inc. an the members
of

its consolidated group as appropriate. Unless otherise indicaed seon ("§") reference are

to the Internal Revenue Code of 1986 ("IRC"), as amended as in effect for the yea in issue.

Bas OD the changes set fort below, Claimat is entitled to a refu of $9,711,514 or such
grter amoWlt as is legally refuble. In addition, Claiant asse th it is entitled to all
correlative and computtiona adjusents and consequential chages to any items (includig,
but not limited to, its alterntive minimum ta, environmenta tax, net opeg loss deductions

and net operag loss cabacks an caovers, caita loss deductions and caita loss

caybacks and caovers, "ad ta creits and ta creit carbacks and carovers) afectig
this yea. Clamat also reques a refund of all related intere pealties, or additions to ta th
have ben overpaid. Claimant also reuest statutory inteest on any overpyment as provided

by law (including, but not limite to, the benefit of offseg, interest nettng, and U1e net intees
rate of zeo on periods of overlapping underpyment and overpayments).
Claimant incured an aggregate caita

loss of $90 1 ,660,007 on the sae by ce

members of Claints conslidaed retu grup (hereinaft referred to as the "BFl Entities")

of Class B Common Stok in six liabilty mangement compaes, as shown on atthed Exlbit
i, to unrlated investors dunng the table yea ended July 30, 199 (the "1999 tax year").
Claimant is entitled to offset this capital loss against caita gain net income of $80,923,602 in

the 1999 ta yea and, as a reult, is entitled to an additional net opetig loss caback frm
the 199 tax yea to its table year ending September 30, 1997 (the "1997 ta yea") in the

1./

74

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 17 of 39

Case 1 :05-cv'-00738.;TCW Document 1-1 'Filed 07/08/2005 Page 117 of 190

amount of $80,923,602 or such other proper amount as provided by law. As a result theref,

Claimant is entitled to a credt in the tale year ending Septembe 30, 1998 (the "1998 ta
year") for pror year minium ta of $9,711,514 or such othr proper amount as provided by

law, consistng of prior year alternative minmum ta of $3,325,937 and prior year wialowed

nonconventiona source ful creit of $6,385,577. Ths reults in a reuction in CIats
tale Income for the 1998 ta yea In the amowit of $9.7 i 1 ,514 or suh other proper amount as

provided by law.

On July 30, 1999, Alled Wase Industres, Inc. ("Alied") acquired substatially
all of the outstding stock of Claimat Prior to the acquisition. Claimat utiliz a lae in.

house st to mange the liabilties aring frm its operations. In contr Alled utiliz a
small in-house stff and outsurce most of its enviroruental maagement, risk magement
and other expise.
In July 1999, shorty before th close of

the acquisition, Claimat retmed the

mangement of its continent liabilties in a maer consistnt with Alled's outsurIng
approach and to provide a legal strctme that would foster the effective maement of the

liabilties. As a replacement for Claiants heavily staed intern deparents, Clat
established six sepate liabilty magement companes based on the specific exprtse neeed
for the manement of the liabilties and compliance with applicable regulatory laws, as shown

on Exhbit 2. In order to conslida the liabilties Into the corrndig liabilty maagement
companes, the BFI Entities contnbute cert notes in an agggate amount of $902,561,661 to

the liabilty management companies in exchage for (i) Class B Common Stock, and (ii) the

asption by the liabilty manement compaies of contient liabilties in the agggate
amount of

S90l,660,007. The abve transacons were ta-fr exchanges puruat to § 351.

l. ~

75

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 18 of 39

Case 1:05-cv-00738-TCW Document 1-1

Filed 07/08/2005 Page 118 of 190

Eah of the BFI Entities then sold their shars of Clas B Common Stock to .
envirownental and inrace consultats with considerable expertse in the liilties maed

by the resptive liabilty mangement company (hereir referr to the "Conslti

Investors"). See identities of Consulting Investors at Exbit 2. The ownerhip of the stock
provides an equity incentive for the Consulting Investors to aggrssively identü an tae

advantage of cost-savi opportties in maing the liabilties.
The agggate amount reaiz by the BFI Entities on the sae of th Class B
Common Stock dur th 1999 ta yea was $901,654. The BFI Entities' ta bais in the Clas
B Common Stock was a substitue basis equal to the su of the ta bas of the prope whch

the BFI Entities contrbuted to the liabilty maagement companes and unuce by the

liabilty magement companes' asumption of the liabilties in accordance with § 358. As
shown on Exhbit 1, the BFI Entities' agregate ta basis in the Clas B Common Stock was

$902,561,661. The liabilties do not reduce stock basis becuse they are excluded under §
357(c)(3) and, therefore, § 358(dX2) applies. Altertively, the liabilties ar not taen into

account under § 358(d) beaue such contingent liabilities ar not "liabilties" for federal income

ta puroses. Consequently, as shown on Exhbit t, the BFI Entties' sales of the Clas B
Common Stock rested in an aggregate caita loss of $90 1.66,007 in the 1999 ta year.
Claimant's deuction of the caita loss relti frm the sae of th Class B

Common Stock durg the 1999 ta year wa disaowed by the Inte Revenue Servce's (the
"Service") exanation tea. The dilowance of

the capita loss is reflected in Isse 71 oftl

Exainaton Report dated May 31, 2002 and revised Septmber 3.2002. The disalowa of
the capita loss is inrrect and without mert. Clait herby incorpraes by referece al

1.3

76

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 19 of 39

Case 1 :05-cv-00738-TCW Document 1-.1 Filed 07/08/2005 Page 119 of 190

documents, letters scheules, explantions, protes, and other corrspondence on this issue
supplied to the Servce.

As a result of th chages herein Claimt's ta liabilty is reduce by $9,711,5 i 4

or such greater amount as is legaly refwble.

(. l(

77

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 20 of 39

Càse 1 :05-cv-00738- TCW Document 1-1

Filed 07/08/2005 Page 153 of 190

Income Tax Return Dep_ "'.. n. Na A.~ Brownin -~erris Industries, Inc. & Subsidiaries

(Re. Oebe"2l

Fc 1120X

Amende U.S. Corpration

OM No. 154132

in i- _

For ta yer en ~ 7/30/99

Enmo an

lYpe Nu. $t -l - 01 .. _ (I ll P.o. bo se 1ns.1
Scottsdale, AZ 85260

iE-l...~..ll -i 74-1673682

or 15880 N Greenwa -Ha den Loo Suite 100

Prnt CRr ci io _. _ ZI co
Enr ""me end addrss IJ on orte (I.. as abve wr -Sam.'

Tel nu (op
480.627.2736

Browninq-Ferris Industries, Inc. & Subsidiaries, 757. N. Eldridqe, Houston, TX 77079

Intal Rev Sece Center ~

..
1

wh81 orna re wa 1I r Austin, TX

'. Fill in appicable Ite and use Part II on the ba to explain any chng
Incom and Deucon (see Instructions)
1

ii .:.:
(-l As adlllr

\I Ne ct In or ld)ei In P-i .

(cl Cc .mo

. TOC lncoma (For 1120 or 112o-, In 11) . . . . . . .
Tot deductio (lo of lis 27 an 29c. For 1120, orlns 23 and25c, Fon 112O-A) ... _". _"""

3 193 591- 494

(BO.923 602 3 112 667.892
0

2
3

2

3.271

762 828

3.271 762.828

Taxbl Inco. Sutr lie 2 frm li 1 _ . . . . . . . .
TaxCFor 1120. Une 31 or For 1120A. fine 271...

3
4

(78,171,334
a
0

(80,923,602
0

(159,094,936)
0

4

Paymts and Creit (se instructs)
Sa Overpayt In pr year sl as a cr . . . _ _ .
b E&lat tax paym . . _ _ . _ . . . . . . . . . . . . . . . . c Refund appd for on Form 44 . .. . . . . . . . .. . _ . d Subtct 1085c fr th sum of in 5a and 5b. . . .
Sa

fi
5c
5d

a
0

90 500,000 BO. 000. 000

0

90.500,000
80, 000,000

10,500,000
0
0
5 447
-..........'O........'O.. 'O.

a

a
0

10,500,000
0

e Tax de with Form 700 . . . . . . _ . _ _ _ . . . . . .

f Ctedit fi Fon 2439. . . . . . . . . . . . . . . _ . . . . . . _
Creit fO( Feder

58
Sf 5g

0

0

9
6
7

lax Ol fus. . . . . . . . . . . _ _ _ _ _ . .

0
S

5.447
a
10 505,447
10

Tax depoSlled or pai wi (or after) the fing of the orginal rem

8
9

Ad lis 5d lJ 6. coi. (e) . . . . . _ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ~i. if an, as slow on ornal return or as later aóJUed .... _ . . . . _ . . . . . _ . _ .
Subt Ioe B mirn ir 7 . . . . . . .. . . . . . . . . . . .. . . . .. . . . . . . . . . . . . . , . . . . . . . _ . _ _ _ . . . . .

7

8
9

505.447
0

Tax Du or Oveipment (see Instions)
10 Tax due. Subtrct line 9 frm line 4, column (c).

St Treury" . . . . . . . . . . . . . . . . . . . _ . _ . . . . _ _ . . . . . . . . . . . . . . . . . . . . . . . . . . _ . . to 10

If payi by chec ma it paya to the "Uni

o

12 Ente the amnt or lie 11 yo want Cl to 20 es ta to Reund to 12 a

11 Ovymet. Subtra lie 4, comn (c), fr in 9 ........... _ .. ........ _.......... to 11 0

Sign Here
Pad

(ai Ii al wl ii ha an iie.

Un I* 01 li lII.. ti I kn an be .. 0r ni an ln. caec lI ih ai Nl In ~ pe. 01 my Mw .. lh -i i- hi itll.he en co 0e1O 01 prre sc -i 1lle.

Prres Us Only
STFFEI:i.l
ISA

i; ,
Pniai ~

of
... S5 or PT

JO i..~'. ,

Fl'a .. (or ~

Zl-i

For Pr Ac an Pap,, Reucon Act Noc;, _ pa ..

Fo
~GOVERNMÊNT

I
78

f 7

f EXIBIT

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 21 of 39

Case 1 :05-cv-00738-TCW . Document 1-'1

Filed 07/08/2005 Page 154 of 190

Fii 1120 (Re. 12-20) Pi. 2
.. Extion of Chang to Items In Pa I (Enter the line numbr frm pag 1 for the items you are
changing, and give the reas fo eac chan. Sho any computa in detal. Also, see Wht To

on page 3 of th Instrctns.)

Att

If th clnge Is due to a ne ope loss carrac, a capiloS5 carrac, or a gel busines credit cari se
Carrba C1almson page 3, and ch here......................... ..... ...... _........ .,...... .. 0

T otlncme Wne 11 decsed due to the caPia/lo reuested In this cl for refnd aDDle to
th table year ened July 30. 1999. Plase rer to Attchment 1 for an exlanati of th chng In Tot Incme.

Taxable Incme (lin 3) has deae due to th caitalos reeste in line 1 as explai above.

Fann 1120 (Re.12-20)
STF fED29.2

79

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 22 of 39

Case 1:05;:cv-00738-ìCW Document 1-1 . Filed 07/08/2005 Page 155 of 190

BROWNG-FERRS INUSTRS, INC. & SUBSIDIARS
EMPLOYE IDENTFICATION NUMBER 74-1673682 7130/99 FORM 1120X EXPLAATION OF CHNGES

INEX OF ATTACHNTS
Explanation of Chaes

2 As Amen Schules
3 IRS Audit Stteent (Form 3610)

4 IR Exaon Report (Form 886A)

CHI:15271

80

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 23 of 39

Case 1 :05-cv-00738- TCW Document 1-1

Filed 07/08/2005 Page 156 of 190

BROWNG-FERRS INUSTRI,

INC. & SUBSIDIAES EMPLOYER IDENTCATION NUMBER 74-1673682 7130/9 FORM 1120X EXPLAATION OF CHANGE ATIACHMENT I

The bas for the changes reueste in this claim for refud are set forth below.
The term "Clait" as us heren refers to Browning-Feirs Industres, Inc. and the members
of its consolidaed grup as apprpriate. Unless otherwse inica, section C'§") references are

to th Internal Revenue Code of 1986 ("IRC"), as amended, as in effec for the yea in isse.

Based on th chages set fort below, Claimat is entitled to a refud of $-0- or such greaer
amount as is legally refudale. In addition, Claiant assert that it is entitled to a11 corrlative

and computonal adjusents and consequential chages to any items (includin, but not
limite to, its altertive minimum ta, enviromnenta ta, net operating loss deductions and net

operating loss cabacks and carovers, caita

loss deductions and caital

loss caracks and

caover, and ta credits and tax credit carbacks and caovers) afecting this year.
Clamant al reuests a refud of all related interest penalties, or additions to ta that have been
overpid. Claimant also requests statory interet on any overpayment as provide by law

(including, but not liited to, the benefit of offetting, interest netting, and the net interest rae of
zeo on peod of overlaping unyment and overpyments).
Claimat incured an aggate capita

loss of$901,660,007 on the sale by cert

member of Claimat's consolidate retu group (hereinaft refered to as the "BFI Entitiesll)

of Class B Common Stock in six liabilty management companes, as shown on attched Exlbit
I, to unrlated invesors during the taable year ended July 30, i 999 (the "1999 tax year"). As a

result, Claiant is entitled to offset this caital loss against capita gain net income of
$80,923,602 in the 1999 ta yea. Ths results in a reuction in Claiants taxable income for

the 1999 ta yea in the amount of$80,923,602 or such other proper amount as provided by law.

1./

81

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 24 of 39

Case 1 :05-cv-00738- TCW Docu"ment 1-1

Filed 07/08/2005 Page 157 of 190

On July 30, 1999, Aled Waste Industres, Inc. ("Alled") acquired substatially
all of the outtadig stck of Claimant. Prior to the acquisition, Clait utiliz a lae in-

house sta to mane the liabilties arsing frm its operaons. In contrt, Alled utilizd a
sml in-hous sta and outurced most of its environmenta maagement, risk maement
and other expertse.
In July i 999, shorty before the close of

the acquisition, Claimat rested the

manement of its contigent liabilties in a manr consistent with Alled's outsuring
approach and to provide a lega strctu tht would foster the effective mangemen of the

liabilties. As a replacement for Claimants heavily sted interl deparents, Claimant
esblished six sepate liabilty maement compaIes based on the speific exprtse needed

for the maagement of the liabilties and compliance with applicable regulatory laws, as shown

on Exhbit 2. In order to conslidae the liabilties i.nto the correspondng liabilty maagement
compaies, the BFl Entities contributed cert notes in an aggegate amount of$902.561,661 to

the liabilty mangement companies in exchage for (i) Class B Common Stock, and (ii) the

asption by the liabilty màngement compaes of contigent liabilties in the aggregate
amoWlt of $901,660,007. The above trctons were ta-free exchages puruant to § 351.

Each of the BFI Entites then sold their shar of Class B Common Stock to
enviromnental and inurance consultats with considerble exse in the liabilities maged

by the respctive liabilty manement company (hereiafr referrd to the "Consulti
Investors"). See identities of Consultig Investrs at Exhbit 2. The ownersmp of the stok
provides an equity incentive for the Consuting Investors to aggrsively identify and tae

advantage of cost-saving opportities in managing the liabilities.

t. ~

82

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 25 of 39

Case 1 :05-cv-00738- TCW Document 1-1

Filed 07/08/2005 Page 158 of 190

The aggrgate amount reaiz by the BFI Entities on the sale of the . Class B

Common Stock durng the 1999 ta year wa $901,654. The BFI Entities' ta bais in the Class

B Common Stock wa a substitute bais equa to the sum of th ta bais of the property which

the BFI Entities contributed to the liabilty manement companies and uneduced by the

liabilty management compaes' asumtion of the liabilties in accrdce with § 358. As
shown on Exhbit 1, the BFI Entities' aggate ta bais in the Class B Common Stock was
$902,561,661. The liabilties do not reuc stck basis because they are excluded under §
357(cX3) and. therefore, § 358(d)(2) applies. Alterntively, the liabilties are not takn into

account under § 358(d) beuse such contigent liilties ar not "liabilties" for federal income
ta purses.

Consequently, as shown on Exbit I, the BFI Entities' sales of the Clas B

Common Stok resulted in an agggate capita loss of $901,660,007 in the 1999 tax yea.
. Claimant's deduction of the capita loss reslti from th sale of the Clas B

Conuon Stock dùrin the 1999 ta year wa disalLowed by the Intern Revenue Service's (the
"Service") examnation te. The disallowace of the capita loss is reflected in Issue 71 of

the

Exaon Report dated May 31,2002 and revise September 3,2002. The dislowace of
the capita loss is incorrt an without merit. Claiant hereby incorprates by reference all

documents, let, scedules, explantions, protests, and other corrspndence on ths isse
supplied to the Service.

As a result of the chages herin Claits tax liabilty is reduce by $-0- or
such greater wnount as is legally refudale.

i, '3

83

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 26 of 39

WINSTON & STRAWN LLP
43 RUE DU RHONE 1204 GENEVA. SWITZERLAND

35 WEST WACKER DRIVE CHICAGO. ILLINOIS 60601-9703

200 PARK AVENUE NEW YORK, NEW YORK 10166-4193

BUCKLERSBURY HOUSE 3 QUEEN VICTORIA STREET LONDON EC4N 8NH
333 SOUTH GRAND AVENUE LOS ANGELES. CALIFORNIA 90071-1543

(312) 558-5600
FACSIMILE (312) 558-5700

21 AVENUE VICTOR HUGO 75116 PARIS, FRANCE 101 CALIFORNIA STREET SAN FRANCISCO. CALIFORNIA 94111-5894
1700 K STREET. N.W.

ww.winston.com

WASHINGTON, D.C. 20006-3817

JAMES M. LYNCH
3 i 2-558-5935
JLYNCH(gWINSTON.COM

May 5, 2005

VIA FEDERAL EXPRESS
Mr. Dominic Mastracchio Appeals Team Case Leader Internal Revenue Service - Appeals Office
8701 South Gessner, Suite 750

Stop 8000 HAL Houston, TX 77074-2942

Re: Browning-Ferris Industries, Inc. (EIN: 74-1673682) and Subsidiaries-Claim Notice of Claims for Refund and Request for Prompt Issuance of Disallowance
Dear Mr. Mastracchio:

Enclosed are the Amended U.S. Corporation Income Tax Returns of BrowningFerris Industries, Inc. and Subsidiaries ("Claimant") for the tax years ending (i) September 30, 1997, (ii) September 30, 1998, and (iii) July 30, 1999. The sole issue involved in each amended return is the capital loss from the sale of stock in six liability management companies, which was disallowed after the examination of Claimant's 09/30/96 - 07/30/99 tax years pursuant to Issue 71 of the Examination Report dated May 3l, 2002 and revised September 3,2002.
Please be advised that pursuant to IRS Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund, p.14 (Aug. 2004), and Internal Revenue News Release IR-1600 (Apr. 26, 1976), copies of which are attached, Claimant respectfully requests that the Internal Revenue Service (the "Service") immediately reject this claim for refund and promptly issue a notice of claim disallowance. IRS Publication 556 and Internal Revenue News Release IR-1600 provide that a taxpayer fiing claims for refund based on contested tax issues considered
in previously examined returns can request in writing that the claim be immediately rejected.

IRS Publication 556 and Internal Revenue News Release IR-l600 also provide that following the taxpayer's written request for immediate rejection, the Service will promptly send the taxpayer a notice of claim of disallowance.

I

84

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 27 of 39

WINSTON & STRAWN LLP
Mr. Dominic Mastracchio May 5, 2005
Page 2

Enclosed is a copy of this letter. Please have the copy of this letter stamped

received and retured to me in the enclosed, self-addressed envelope.

~~
Attachments Enclosures
cc: Dale L. Parker

Respectfully submitted,

Lawrence Focazio Robert F. Denvir Peter W. Poulos

CHI:lS27314.1

85

Case 1:05-cv-00738-TCW Document 36-2 .7~ii'5:4'2

Filed 11/22/2006
:'1976' RUls

Page 28 of 39

21. N.75

" m:66)"¡. Int.'Rcveiue. N~;iidea IR-IØOQ¡ April.26,' 1916. . .:.

. ,.\. .

(Cødø'6ëc.. '6402 'aiid 1422) ". Refds an Credts: SlÚts 'by...tupayerr,'spe proedql-Ta:er .fi. 'ei
:fo¡"mund 'Of contèted iic:êt estate oi: git tües riy ch..ta ine Øiei cá .to.t1c

v

..P'pi~'to"¥~'101~; l"~~~'.~"~tl~ 'clni'(or r~fud~. .J;i;k rCïf~:".f 54;l)1 an
'S1aU.9..' ',.: ~;:." .." ...... ':.. . .... ," "',:.' " ::'..,. :~.'.; " ' . .' .-,...'

cos faster by us a spia proc1i....IHhoy.do J1t wi.to puue.an'aøø wi of- .cJ- . '" '.' ~ ~ t: be pr9IPl:Y set to thl1.tay'er~'. J, lI.predur

thci IRS, d~~.reuest. in..wrti tb th.cla.bc ~ed~.7 rej~ A.~

:t.T~~~ye~~.. ~il~g' .~Iai~: :£0;. .;èluii base; .:.' .~:t~payèr;"in ~~h :a'cà~. ~~~ d~~':not .

solely oncòiittstediticonie; tstate or gift:-t~ wish to pursue. an ~ppeal within the. IRS
issues :'-coii~iäered in :::Previously . ex~-ied. ~oulct r.equest.m ..~iti9g .that. the' cla,ltp. ~e

~etur,;m.y'~ii~t,t¿ 'ßive their.;èaei to ~ed!ltc:Y re¡ected..lt ~ti~.~ .of, ciar-

th. eourts s er y b" ... , ... . J~~oce-.- the tap'a)!~r~ Upon: .rec~.tpf.:.tle. dis¡iiio~ e - . fa' t. using..jL. sP~c~. al . ~isi.owance. will then be promptly sent to

~:ideJ .... . , '. ..' , .Servi:e tl?~ay. ance. in the .trnited. ~~tes Distnct . . . ,the Inte~~ R~";nl1e .. . ..' refund sut $e .ta~p~yer li'..two ii;~rs .to .lie,'a
.104X; 1120~ or oth~r Ç1alms fpe refund.. States Court Qf Clainis. .' .

. '. .', ~', '..., '. " . . ~
. . .1.

. .' ..... .,... . '" 0' . ',.
'. " ". ~ ....
~.- 'z.. .. : . (If 6Øiol..:CÖnsione~s:Deiég8tioI.OrdU' Ñ,t) 4i(~~. .6), .flleif with the

. Thi( ~p~dal.p'rQi¡.dure:.,aRP1ieS,.to . Forins Coúrt having jìii~diction.91 ilie U~ted
:l:'"

'~egister on ~~~ch.30..1976..,; :.',' .:' :.: ' . . :":' :,'.. ....' .-.. . '~...'..

Fe4eral

.' '. , ..' '.'.. ' (Code Sec.1803.J. "'. 'c. . '.

: ;~. :illt~ReIcnUCkS~i.:.Ddegti of äiitirity:' ïirpiest' fU::Au~'to
be ;4de~ Bac:uef~en: lJ 5975.01.. ." .
Depent Ordr No.' ISZ (Rêsed)

d.ern;. tbe ne .for. imprest fu to. be .use forrig smal ca pur' ba
, date . R '. 1\1 C ..., ..' .... , " .

. .' Putsuat t~'autli&:ty .vbiied:.iii ~Iië"C6m-' :Cb~(J''¡~èai, S~cton, ':j1is.~ :M:à~~eit
.iissioD.~r::.pniitenai..Re:i~núë.by:Ti;eaUl ,',. :Pl'VS~~Jl .:. ..' ': : . . .. .

to the offcials named below the authorty" '-Assistant. Regna Conussioners (Admn-

October is, 1959, there is hereby delegted egon oisioner.." "'. .

bedustehd flOt mati. '.. '~g ~lcla.~.:114ies.: .'Chiefs . 'FiseàJMartiieit .Br.cheS--

to detenine the need for imprest fwids to isttion)

an are reuired; to requestat ..deSlgn--, '. Qitos, Fisca '~ret' Manaent e oc ODS the Wi.. Suu. Seons, Fisca . funds
tion of offcer and employees :to 'ser' áS' 'Bri.
,'c:hieriÎ'with~.åùthority:to:'hold 'cah för,.the" . ....... . --.' '. '....":: '.', :.:: .. ':

. making õhtÌl- ¿ Ii' ui tò '. 't',.. The,autho~ty delegated, , .' . ., . , . ". as '.p es;', . requesbè redelegted..... hereinmay not.
the reyåtiOn:'of'sucdeSignatio1i~; aiid..to ..,' .." '....;. :...... .. "..-. ;."

. reqiist.-the:'anØunt of''aV:a,ce .to Wé c:ed. . :.This.;Oi'~ ':sullersedes ne1ega~oii 'Order
by ea.sucl: cahier:' . . '.' ,..': : :., '- No. 411 (Rev~ 5.), Issued'September.3,'.1-965.

Fiscal:~anagetnent.Ofc.' :.' '. '. .Date'of'issué: Jaiuar'20,197~. .

:~,sisiät :~iscå ¥åia~~nt¡"atfcer:' ':"':"\" . .' ;¥ecti:Ve:d.f~bniai ~O,., r9?6. :: :. j:' , . '. ,

'..' ment Division':'.,.)'. ,-, ..,' ::....__.. ...... . :. 'Cøm.s"... . :i", ".,
:',:., .
.",. ..~ni~pl. .int~..R.~~çi~e ..ser Ncw..R~cajIl-i60i~:.APri.2si )976. ..
~ 'l':;",.~ '.~'~.. ...:.....~~... :':.'.'. '. ..';,' .::';' .\.... ...;~.;. :.~.~IC~d~. Se~. 4142)\: .;":i '. .'.;.~,' ,':::; . lr'~: ~.::~~=':'-' ,.,;': . .,",...

Clùef¡ Acoonting:' Bråcl' Eisal Manage-: '. .:, " DONALD C. ALEA'NDEI

. ...... . ',,' . .......,' '.' ., ,

.,.........

det~..t1~ .~um 'iny,Cl~~t..retur :has .~ iacr~~ 'fJt1i.:6%..tó 6.75%. ,:l~.kr~~~:..R~m,u::53~; f,::..... ,'/:. .... .....:;n':; .";.'.:..-..'..;',:, d~' ..,'"
fou'ndatiotÌs' ùi,..(fètênng.:i'níitum"in-' 'Ser'èé tbdy'iinouiic'ed;: . ...'-'. .'-""¡"':'.' ;

yea. ~~; ia..i~t6, tn~. appllable pe~tage 'tó ~ ~u~' by pnV;tè.d.fÇ)undation in

. . Pri~~ fo~tiöi; 'M~ in'v~bnt: iet: Applicabil;.:~~ta-::ro~t~ble

:. .The .~rcta.e'to" .be';:used ;.pý. Prvate. celjtto 6,75 ¡:ëent?~he Intern Reveiiæ

vestment retur for table yeaíi bcgiil- The minimwn investinfietur isafa.~-

~'L'&.&.Oø .:(Ç-l976:-Coinèr¿e eiei-Housê, II1l:

ning in 1976 has ben increased .from 6. per- . .tor' in "-deterining the amount of income

86

.. ..'""'...i"" .. .. 'I.w .A'-oW... vu.u \..I.L,I:1

Case 1:05-cv-00738-TCW

Document 36-2

Filed 11/22/2006

Page 29 of 39
OMB No. 1545-132

Form 1120X
(Rev December 2004)
Deartt of the Treaswy

Amended U.S. Corporation
Income Tax Return

For ta year ending

Interl Revenue Serce
Name

~ 9/30/97 Ente mo and r.
Employr idnticaon numbe

Please
Type

B~wnin -Perris Industries LLC tor conolidated rou t k a Broi -Perris Indstries Inc.. $ubsidiari s 7 _

Number street and room or suite no (Ifa PO, box, see instctions,)
Suite 100

Print
Scottsdale AZ 95260

or

Telephone number (optinal)

480-627-2736

Enter name and address use on orginal return (If same as above write "Same")

Browninq-Ferris Industries. Inc. & Subsidiaries. 757 N Eldridqe. Houston. TX 77079

Internal Revenue Service Center ..
where original return was filed ,. Austin, TX

Fill in applicable items and use Part II on the back to explain any changes

mm
1

Income and Deductons (see instructions)
1

(8) At originally

reported or as

previously adjusted

(b) Net change lnc~ase or (dec~ase)expin in Part II
0

ee) Correct amount

Total income (Form 1120 or 1120-A. line 11), " " " , ,
Total deductions (total of lines 27 and 29c, Form 1120, or lines 23 and 25c, Form 1120-A) ,. ,." , ,., ,. , , ,
Taxable income, Subtract line 2 from line 1 ,
Tax (Form 1120. "., " ,,", .,

4 389 900 149
4 234 964 403

4 389.900.149 4 315 888 005

2

2

90.923 602

3

3

154,935,746
42 784 657

(90,923,602
(18,549,092b

73,912,144
24 235,565

4

line 31, or Form 1120-A, line 27) . . .

4
5a 5b 5c 5d 5e 5f
Sa

Payments and Credits (see instructions) 5a Overpayment in prior year allowed as a credit ' " b Estimated tax payments , .. ., ". ., '" ,. , "
C
,., ..

0

0 0 0

0

".
" "

Refund applied for on Fonn 4466 "
'" "
, , ..

, .,

"., '"'' ,

102 500. 670 32 709 291

102 500 670 32 709.291

d Subtract line 5c from the sum of lines 5a and 5b,

69,791,379

0
0

69,791,379

e Tax deposited with Form 7004 f Credit from Form 2439, , ,,,., ,.,
9 Credit for Federal tax on fuels,
6
7 8 9

." ,.., ,. ,'"
,

",

, . , ,.,.,,, ,.

0
0

... .

". , ...

., .,

Tax deposited or paid with (or after) the filing ofthe original return

'"'''' " ....""" "

, ,.,

6

19 079.286 88 870 665 46 086 008 42 794.657

Add lines 5d through 6, column (c)" . , " , ., " ., " " ., , , " . " " " " . " , ,. ...,,,.,,,.. ,'.", .,,, ,.,,, ,.,,, i

Overpayment, if any, as shown on original return or as later adjusted ' """

. ,

." ,..,,,,,,,,,,

7 8
9

Subtract line 8 frm line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax Due or Overpayment (see instructions)
10 Tax dUe. Subtrct line 9 from line 4, column (c), If

sttes Treasury", , , " " " , '" .",,,,,..,, '" ,,, ,. " , " " , , " " " " " , .. 10

paying by check, make it payable to the "United

o

11 Overpayment. Subtract line 4, column (e), frm line 9 ." ,,' . ., , " , ,., .. 11 18 549 092
12 Enter the amount of line 11 you

want: Credited to 20 estimated ta" Refund" 12 19 549 092

Under penalties of perjury, I declare that I have flIed an oriInal retum and that I have examined this amended return. Including accmpanying
schedules and statements, a~d t th best of my knowledge and belief. this amended return Is tre. corrt. and complete. Delaratin of p~parer

Sign Here
Paid Preparer's Use Only
ISA
STF FE04298F 1

(othr th taxpayer) is base n II Information of which ø~parer has any knowledge

~ SIgnature Vice Date' Title - Tax , J~' ~ ~ of 0 President
sinature ,

P~parer'S ~ Date Preparets SSN or PTIN
Form 1120X (Rev 12-2004)

Flrm's name (or ~ yours If self-employed) ,
address and zip code

For Prlvaçy Act and Paprw Reducon Act Noice, se pa 4"

87

.. 1120X
~

(Re Oobo 204)

Amended U.S. Corporaion
7-Telephne ~IÑ (opiial)

OMB No. lS4l32

Oe dlb Ti-

1r~
l80-627-2736

Inco Tax Return

Nome

-ll_ll.,. _2

i-an JUf ao fa .. _lDAlI...... ofll oiin 1al DI-i

Num st an rom QL su no. elf. PO. bo, se IMns.)

-Pe!. rntde. i. f_ COolid.t-i crmuD !lk/. IllDt.l'rr i-1'1... rac. .. .l.l4Lii.

II ~.. of CJnpto ii In Pa I (E thin nu fl ps.11' thll yo _ cl 8I øM th _ fo ea cI Sh er oopu In daL AI se WlToAl an P8 a of thln

1) or Pt

15880 . Greenwav-HaYd Lo. SUte 100

Cl or la. it Ind zip coe

ir_ cI .. cD II a.. ll'" ~ . calo ~ or. ii1li- ci~ CS se eaCliili3.___ . _ _ . . _ . . _ . . . _ . . . _ _ . . . . . _ .~ ~

_ . Scott.dale. AZ 852.0

En na an ecii us on Clt re (If same .. ab wr -sme

1 Brona-Perris Iniitri.. 'Ic." Subidiaries. 757 ll Bl4rdae. Houston TX '17079

-~-~~~~~~~.~~~-~~~----_._-----_._.
_.._......._._- _...._-_.._----_.-...._.._----_.._----_.._~.__..._._.....__._---_._--~.._..

Intal Renue Se Centr lr whe orginal ie waB fid "Au8tin. TX
(0) Aooill
lbl No dlng Inn:% ~r=)-

....--------.--..--.~---~_.......___~_._____o_._.___..._._..____._...._.._~......___..__._..

Fill

In applicabl itms and use Pa lion the bak to explain any chnges

..
p==.l:~
1

Income and Deuctons (see instructons)
4. 389 800 149
4 389..00.149
80 923 60 4 234 964 403 154,835 746 :...~, 42 784 657 (la 549 092

(el ~ am

~~~~.~~~~_~.~.i:~~~_~~~~.....__..._._.. - -i.ii

--...-~..~~-.---..--...---...~..--.--..-------_..___~..__~_......____.....~O_____.___.~

Case 1:05-cv-00738-TCW

1

Totl incoma (Form 1120 or 1120-A line 11)

~--_..__..----_.._----------------_..~_.__._-~._..__.._-_.----_... ii '-11- 4)"'-" illDlh addl nol--ii _ -i _ -ild.. ._--_._._-_._.._...._-_...._-_._~._._---~--~-_._-_._._-_...---_..._....._~-_.._.._._---...-....~----..._.-..-----.-..-...._--...----.-...-..-...~......----_~____..~._..._....._.....o_....___..~___..~.....
.._----~_._--~...-..-._...~.__..._.._---~.._..__.._..._..._......

2

TotldeucUon (tD of liea 27 end 29, Form 1120.

01 lins 23 and 25c Form 112D-A)
l 315 888 005

..
2
3

3

Taxable Inme. Subtct line 2 fr line 1 .
(80 923.60
24 235.565

73,912,144

4
4

TaxlFor 1120.

lin 31. or Form 1120-A, lin 271. . .

- ~ . n.... .

Paymnt and Crets (se instrucions)
0 0
102 500 610 32 709 291 102 500 670 32 709 291 0 0

!S OVyment in prir year allo 88 a crdü .
Sa 5b

----------_._._.......~---_..
:-.__._--_.._..~----.._..~-_..._-----..-.._;...._-....._.._---~.-.....__._......_.._--_._.._........_.._.~

b Estted ti paymen18 C Refund appl fo on For 44 .. d Sub1r line 5e fi th su of One Sa and 5b.

5i

..
69,791.319
69,"191 319
0 0 0

0 0

Document 36-2

e Tax depo wi Form 7004
1I

5d 58

f Creü fr For 2439. . ._
5i
-19 079 286

...

9 Cre~ for Fedlllx on fuela. .

..

........
I
7
8e 870 '65
. .

..

--.--.-...,-....-......------...-.-......-.--....--__..~..~._.__~.._.._._.._..._..o-~...._.______.._ ~.__.._-_.._.._~~...~...._--_._--_..-._--------..._-_._--_..._._-_....._.._--...__..~_......._--_. ..~..-.__..-.._....._....__..._---.._"..._------_...._~..._-_...~.__..._-,-~......_._.._---_..:..
._---_..__.._-_.....~~.._._.._---...._----_..__.....__..__.__........_-,..~........_....---_._._.__..--.-.....---..--.-....-.--.-~---..-.._~-~~.._.~.~~...___....~..~O_~_.........._.___.._.._........~___.. .._._..__....
: -_........~.__......~._-_...........--_.._..._.~....._~......._......_......._..".._....._..._-_..__._.....~-_...._,._~..-....._....-

6

Tax deted 01 paid wi (or aller) th fiing of orinal return th

7 8

Add Hoes 5d thugh 8, coumn (e) . . . _ . . . .
..
".086 008
.2 7a4 657

~ .. "...",. .

..
8

Ovymnt If any. as sh on oriinal rern 01 as la adjustd
9

.. .. ...

9

Subtct line 8 fi Ine 7 . . ... . . . . . . . . .... . . .. ... . . . . . . . . ... . . . . . . .. . .. . . . . . . .. ..

----'_....._'-_._.._..._~--.-._---_.....~...,.._-..._...-_..._..-_.._............__._.~_..._--....-

Tax Due or Ovrp (see

Instructons)

10

Tax cl. Subl line 9 fr Una 4, column (e). If pang by ch, make I payable to the .Unlt

~-_._---_..~----_..........,~--------...~..__......~--.-..-_...---~._-_.._-_.__.10
0

Sl Ti-wy. .
. . -

.. ...._. .. ...
~

.... .......

.7-...---.-...---...--.......----.'-..h....-.---~__.....,._...__~~_____..~.__*.__~_._.._.__._~.._

Filed 11/22/2006

11

12

Ov Sub li 4, coumn (e). fi One 9 .....

~._~.;....__.~~._-~-.._.._~--_.._-------~-_.._---_.._.__._-~......~.__.'.......
.,-:.._--_._......._......__........_-_.._._-_.._-_.._---_._..............-_....._~....__...'.

... . ... . _... ~ 11 18 54' 0'2 Ent th amou of line 11 yo wa Cn to 20 ..ni ti ~ R8 ~ 12 18 54' 092 == ofon 01__~_ofmy~ llboll.llls haw __ lr._ ll com_. _OCno pe. 1_.. I ha.. li on ori ""m it lh I -irols ~I. ..oc mu lnkJln ofpr

SIn
I Do

("2 "'~1s - _So of - p-,. iny_ii

---_._---...._...__._--:------_.._._--_._~--_._..__..._------_..__..
--_._~--_..:-~---_..__.._-~._.._..~_...~....._~_...._.._._-;......-..__.......-.~._.._---

Here

. l¿ ;)- i Hd-tU . Vice 'i-iilt - Tix
Pnpei SS or PTIN

Pad
I EI
i Ph no

Pns

Slg Do TI. ='. I~D

Am', i- (or ~

Fo 11aa ..1H
Fo 1120X (R8 12~1

Us Only

zip oi

Page 30 of 39

.. .,

Fo"" Ac

.-,

~~~) an i- __ Ac -. _ _.i

_._,~"-

: GOVERNMENT
00 00

¡EXHIBIT

I 9

PROTECT REFUND CLM
PROTECTIV REFU CLAIM

BROWNING-FERR INUSTRI, LLC
BROWNING-FERRS INDUSTRIS, LLC FOR CONSOLIDATED GROUP FIKA

FOR CONSOLIDATED GROUP F/KA

BROWNING-FERR INDUSTES, INC. & SUBIDIAS

BROWNG-FERRS INUSTRIES, INC. & SUBSIDIA
EMPLOYER IDENTIFCATION NUER 74-1673682
9130/97 FORM 1120X EXPLANATION OF CHAGES

EMPLOYE IDENTCATION NUMBER 74-1673 9/30/97 FORM 1120X EXATION OF CHAGES
ATTACHENT 1

ThEX OF ATTACHMENTS

The baes for the changes requesed in ths clai for refud ar se forth below.

Case 1:05-cv-00738-TCW

1. Explanaton of

Changes
The te "Claiant' as use herei refer to Browning-Feiis Induses, LLC and the membes

2.. As Amened Schedules

of its conslidated group as appropriate. Unles otherwise indicated secon ("§") reerces are

3.

IRS Audt Statement (Foim 3610)

to the Internal Revenue Coe of i 986 ("IRe", as amended, as in effect for the year in issue.
Bas on the chages set fort below, Claimant is entitled to a refud of$18,S49,092 or such
greate amount as is legaly refudable. In addition, Claimant aserts that it is entitled to all
com:lative and computationa adjustments and consuential chages to any item (includig,

4.. IRS Exaation Report (Foim 886A)

5.

Copy of 7130/99 Claim fOI Refd (Foim I l20X)

Document 36-2

6.. Copy of

Rev. Prc 2002-43 Designtion

but not limite to, its alteratve minimum tax envionmenta tax, net operatig loss deductons

an net opeatig loss caryack and cayover~ capita loss deductons and caita loss

caryacks and caiyoveis, and tax credts and ta credit caybacks and caryver) afecg
ths ye. Claiant also reques a refud of all ielated int, penalties or additions to ta tht
have be overaid. Claiant also reques statutory intert on any overayment as provided
by law (includg, but not lited to, the beeft of offsetg, intet netg, and the net interst

Filed 11/22/2006

iate of zer on period of overlaping underpayment an overpayment)..
Pusut to Ti-. Reg. § 1. 502-77 A(d), effecve fOt the taable yea ened

Sepember 30,1997 (the "1997 ta yea"), and the Designtion filed at Ogden, Uta on or about
Augu 24,2006, in acrdce with Rev. Pr. 2002-43, BFI Waste Systems ofNoith America,

Page 31 of 39

22&l'

226331 i

00

'-

Inc. ("BFI Waste") is the duly authri agent of the consolidated grup (the "BFI Grup") of

appioac an to prvide a legal stre th would foste the effve mangement of the
liabilties. As a ieplacent forBFI Inc.'s heavily staff interal depents, BF! Inc.
eslied six separe liabilty maagement companes baed on the spific expetise neeed
for the magement of

which Browng-Ferris Industres Inc. ("BF! Inc.") was the common paent prior to its

teion on Deber 30, 2004. BFI Wase filed refu claims for the i 997 ta ye on

bealf of

the BFI Gioup at Austi Texas on or ~bout Augu 24,2006. The prteve iefud

the liabilties and compliance with applicable reguatory laws, as shwn

cla fied herein by Clait fox the 1997 ta yea is inteed to be effectve ony in the event

on Exhibit 2. In oider to conslidate the liabilties into the corrndi liabilty magement
compaes, the BFI Sellei contbuted ce notes in an aggegated amount of$90,561,661 to
the liabilty management companies in exch fo (i) Clas B Comon Stok, and (ii) the

tht Claian and not BFI Waste is detmied to be the prope agent for the BFI Grup.

Piior to the Degnation pusuat to Rev. PIoe. 2002-43, the BFI Gioup incuITed

Case 1:05-cv-00738-TCW

an agggate catal loss of $901,660,00 on the sale by cetan of

its membes (hereinaer

asption by the liabilty maagement companes of contingent liabilties in the aggegae
amount of$901,660,OO7.. Th above trctons wer ta-free exches purt to § 351.
Eah of

re to as the "BFI Seller") of

Clas B Common Stok in si liabilty magement

copanes, as shown on attched Exhibit i, to unrelated ineslS durg the tale year ended

the BPI Seller then sold their sh of Class B Common Stock to

July 30, 199 (the "i 99 ta ye. Claimant is entitled to off ths caita loss agast caita

environmenta an inswance consultats with consderle expetise in the liabilties ma
by the iesve liabilty mangement company (hernafter refened to the "Consulti
InVesOlS"). ~ identities of Consti InVesOIS at Exhbit 2. The ownerhip of the stock

gai net income ofS80,923,602 in the 1999 ta year and, as a ret, is entitled to an additional

net opeatg loss caack ñom the 199 ta yea to the i 997 tax year in the amount of

Document 36-2

$80,923,602 or suc other plOpe amount as prvided by law Ths iests in a reucon in

prvides an equity incetive for the Consulting InVestolS to aggsively identify and tae

Claiant's taable income for the i 997 ta year in the amount of $80,923,602 or such othei

adantage of cost-savig opptuties in mangig the liabilties.
The aggregate smount reaized by the BFI Seller on the sale of the Class B
Common Stock dwinthe 1999 ta ye

prope amount as provided by law.

In July 30, i 999, Alled Waste Inustres, Inc.. ("Alled") acquire substantially

was $901,654. The BFI Seller' ta bas in the Cla
B Common Sto was a substitue basis equa to the su of the ta bais of

all of

the outsta stock ofBFI Inc. PIior to the acuisition, BPI Inc. utlized a 181-ge in-house

the piopey which

st to ma the liabilties arsi fr its opeon. In contrast, Aled utili a small in-

the BPI Entities contIibuted to the liabilty mangeent coanes and unuc by the
liabilty manageent companies' assumption of

Filed 11/22/2006

hous st and outsow'C most of its enVÎonenta magement, rik mangement and other

the liabilties in accidace with § 358. As
shown on Exhbit 1, the BFI Sellei' agegate ta basis in the Clas B Coon Stock was
$902,61,661. The liabities do not reuce stock basis bece they 81e excluded under
§ 357(c)(3) and, therore, § 358(d)(2) aplies Altertively, the liabilties ar not taen into

expese.

In July 1999, shybefore the close of the acuis