1
Exhibit 8.1
Opinion of Debevoise & Plimpton
Concerning Certain Federal Income Tax Matters
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[Letterhead of Debevoise & Plimpton]
January 20, 1998
MCM Group, Inc.
c/o McCarthy, Crisanti & Maffei, Inc.
One Chase Manhattan Plaza
New York, New York 10005
Material Federal Income Tax Consequences of
Receipt, Ownership and Disposition of Units of
Capital Representing Limited Liability Company
Interests in Global Decisions Group LLC Issuable
in Connection with Merger of GDG Merger
Corporation with and into MCM Group, Inc.
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To Those Concerned:
We have acted as special counsel to MCM Group, Inc., a Delaware
corporation ("MGI"), and each of Global Decisions Group LLC, a Delaware limited
liability company (the "Parent"), and GDG Merger Corporation, a Delaware
corporation and a wholly-owned subsidiary of the Parent ("Sub"), in connection
with (I) the proposed acquisition by the Parent of all of the outstanding shares
of capital stock of MGI through a merger (the "Merger") of Sub with and into MGI
pursuant to a Plan of Merger and Exchange Agreement, dated as of August 1, 1997,
as amended as of the date hereof (as so amended, the "Merger Agreement"), by and
among MGI, the Parent, Sub, certain individuals and entities named
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MCM Group, Inc. 2 January 20, 1998
therein and The Goldman Sachs Group, L.P., and (II) certain other proposed
transactions contemplated by the Merger Agreement, including the adoption, upon
the closing of the Merger and the other transactions contemplated by the Merger
Agreement, of an Amended and Restated Limited Liability Company Agreement of the
Parent substantially in the form of Exhibit I to the Merger Agreement (as so
amended and restated, the "LLC Agreement").
In so acting, we have participated in the preparation of the Merger
Agreement and the LLC Agreement, and in the preparation and filing with the
Securities and Exchange Commission of a Registration Statement on Form S-4 under
the Securities Act of 1933, as amended (Registration No. 333-34477), relating to
the proposed issuance of units of capital representing limited liability company
interests in the Parent issuable in connection with the Merger (as amended as of
the date hereof, the "Registration Statement," all capitalized terms used herein
without definition having the meanings set forth in the Registration Statement).
In connection with the preparation and filing of the Registration
Statement, you have requested that we render an opinion to you as to the
material United States federal income tax consequences of the receipt of Units
in exchange for MGI Common Stock pursuant to the Merger (or the receipt of cash
by holders of MGI Common Stock exercising appraisal rights) and the ownership
and disposition of such Units by holders of MGI Common Stock who receive Units
pursuant to the Merger (the "MGI Unitholders").
In rendering the opinion set forth below, we have examined and relied
upon the representations and warranties as to factual matters contained in the
documents referred to above or made pursuant thereto. We have also examined and
relied upon originals, or copies certified or otherwise identified to our
satisfaction, of such other documents, records, certificates and other
instruments as in our judgment are necessary or appropriate to enable us to
render such opinion. The opinion set forth below is based in part upon facts
described in the Registration Statement, upon facts that you and the Parent have
represented to us, and upon certain factual assumptions set forth herein. In
particular, we have assumed that the Parent will be operated at
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MCM Group, Inc. 3 January 20, 1998
all times in accordance with the Delaware Limited Liability Company Act
(6 DEL. C. parag. 18-101 ET SEQ.) and with the provisions of the LLC Agreement.
We have not, however, undertaken any independent investigation of any factual
matters set forth in any of the foregoing. Any alteration of such factual
matters could adversely affect our opinion.
The authorities on which this opinion is based are subject to various
interpretations, and there can be no assurance that the Internal Revenue Service
(the "IRS") will not challenge the conclusions set forth herein or that a court
would sustain such conclusions if challenged by the IRS.
This opinion is based on the United States Internal Revenue Code of
1986, as amended (the "Code"), existing and proposed Treasury regulations
promulgated thereunder (the "Treasury Regulations") and administrative and
judicial interpretations thereof, all as of the date hereof and all of which are
subject to change, possibly on a retroactive basis.
We express no opinion as to the tax consequences to any holders of
Units other than the MGI Unitholders. The tax treatment of a particular holder
of MGI Common Stock may vary depending on the holder's particular circumstances.
This opinion is based on principles of general applicability, and does not
purport to address all the tax consequences that may be relevant to a particular
holder or to holders who may be subject to special tax treatment (such as those
who received their MGI Common Stock in connection with the performance of
services, banks and other financial institutions, real estate investment trusts,
regulated investment companies, insurance companies, tax-exempt organizations,
dealers in securities, foreign corporations, foreign partnerships, other foreign
entities and individuals who are not citizens or residents of the United
States). In addition, we express no opinion as to the tax laws of any state,
local or foreign government that may be applicable to a particular holder of MGI
Common Stock.
Subject to the foregoing and to the qualifications, limitations and
exceptions set forth herein, and assuming that the Merger and other transactions
contemplated by the Merger Agreement are consummated in accordance with
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MCM Group, Inc. 4 January 20, 1998
the terms thereof and as described in the Registration Statement, we are of the
opinion that the material United States federal income tax consequences of the
receipt of Units in exchange for MGI Common Stock pursuant to the Merger (or the
receipt of cash by holders of MGI Common Stock exercising appraisal rights) and
the ownership and disposition of such Units by the MGI Unitholders are as
follows:
CLASSIFICATION OF THE PARENT
Under the provisions of the LLC Agreement, the Parent will not elect to
be treated as an association taxable as a corporation for federal income tax
purposes. Accordingly, the Parent will be classified as a partnership for
federal income tax purposes unless it is a "publicly traded partnership." We
note that the LLC Agreement contains certain restrictions on transfers of Units
and other limitations that are applicable until the IPO Date, which are designed
to prevent the Parent's being treated as a publicly traded partnership. Because
determination of "publicly traded partnership" status will depend in large part
upon facts existing in the future, there can be no assurance that such
characterization will not occur, and we cannot provide an opinion on this issue.
If the Parent were treated as a publicly traded partnership, it would be
classified as an association taxable as a corporation, rather than as a
partnership, for federal income tax purposes.
This opinion is based generally on the assumption that the Parent will
be classified as a partnership for federal income tax purposes. See below under
the heading "Ownership of Units--If the Parent Were Classified as an Association
Taxable as a Corporation" for a discussion of certain federal income tax
consequences of the Parent's being classified as an association taxable as a
corporation for federal income tax purposes.
RECEIPT OF UNITS IN EXCHANGE FOR MGI COMMON STOCK
We understand that Sub was formed for the sole purpose of effectuating
the Parent's acquisition of all of the outstanding MGI Common Stock and has
conducted no activities other than those required for the Merger. Accordingly,
the existence of Sub should be disregarded for
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MCM Group, Inc. 5 January 20, 1998
federal income tax purposes, and the Parent should be treated as acquiring all
of the outstanding MGI Common Stock directly from the MGI Unitholders in
exchange for Units.
Assuming that the existence of Sub is so disregarded, the conversion of
MGI Common Stock into Units, and the conversion of common stock of Sub into
common stock of the surviving corporation, in each case pursuant to the Merger,
will be treated as a contribution of such MGI Common Stock by the MGI
Unitholders to the Parent in exchange for such Units.
Accordingly, for federal income tax purposes, in general, an MGI
Unitholder will not recognize gain or loss upon the receipt of Units in exchange
for MGI Common Stock pursuant to the Merger (the "Merger Exchange"). If,
however, any MGI Unitholder were to receive a related direct or indirect
transfer of cash or other property from the Parent, the Merger Exchange and such
transfer could be recharacterized as a taxable sale or exchange of the holder's
MGI Common Stock under section 707(a)(2)(B) of the Code. Because the
determination of whether there has been such a related direct or indirect
transfer will depend in large part upon facts existing in the future, there can
be no assurance that such a transfer will not occur, and we cannot provide an
opinion on this issue.
If an MGI Unitholder does not recognize any gain or loss for federal
income tax purposes upon the receipt of Units in exchange for MGI Common Stock
pursuant to the Merger Exchange, the initial tax basis of such Units will be
equal to the holder's adjusted tax basis in such MGI Common Stock at the time of
the Merger Exchange. See below under the heading "Ownership of Units--Adjusted
Tax Basis of Units" for a discussion of adjustments to the tax basis of Units.
If such MGI Common Stock is a capital asset in the hands of the holder at the
time of the Merger Exchange, the holding period for such Units will include the
holder's holding period for such MGI Common Stock.
RECEIPT OF CASH BY HOLDERS EXERCISING APPRAISAL RIGHTS
For federal income tax purposes, any holder of MGI
Common Stock who exercises appraisal rights under the DGCL and receives cash
equal to the fair value of such MGI Common
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MCM Group, Inc. 6 January 20, 1998
Stock from the surviving corporation of the Merger will be treated as having had
such MGI Common Stock redeemed by the issuer of such stock. If the holder
exercises or causes to be exercised appraisal rights for all of the MGI Common
Stock actually and constructively owned, the holder will be treated as having
sold MGI Common Stock in exchange for the cash received. If the holder exercises
or causes to be exercised appraisal rights for only a part of the MGI Common
Stock actually and constructively owned, the holder will be treated either as
having sold MGI Common Stock in exchange for the cash received or as having
received the cash as a distribution possibly taxable as a dividend, depending on
whether or not the holder meets certain requirements set forth in section 302 of
the Code.
OWNERSHIP OF UNITS
ALLOCATION OF THE PARENT'S INCOME, GAIN, LOSS, DEDUCTION AND CREDIT
If the Parent is classified as a partnership for federal income tax
purposes (as discussed above under the heading "Classification of the Parent"),
the Parent will not be subject to federal income tax. Instead, each MGI
Unitholder will be required to take into account, in computing the holder's own
taxable income, the holder's distributive share of the Parent's items of income,
gain, loss, deduction and credit for each of the Parent's taxable years that end
within or with the taxable year of the holder. The character of such items of
income, gain, loss, deduction and credit in the hands of each MGI Unitholder
will be determined as if each such item were realized directly from the source
from which realized by the Parent or incurred in the same manner as incurred by
the Parent.
We note that, in any given taxable year, an MGI Unitholder's
distributive share of the Parent's income and gains net of the holder's
distributive share of the Parent's losses and deductions could exceed the amount
of cash or other property, if any, distributed to the holder during such taxable
year. Accordingly, an MGI Unitholder could be required to pay federal income tax
on amounts not actually distributed.
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MCM Group, Inc. 7 January 20, 1998
Each MGI Unitholder's distributive share of the Parent's items of
income, gain, loss, deduction and credit for federal income tax purposes will
generally be determined in accordance with the provisions of the LLC Agreement.
The LLC Agreement provides that, except for items with respect to any property
contributed to the capital of the Parent by a holder of Units, such items will
be allocated, to the extent permitted under the Code and the Treasury
Regulations, among the holders of Units in accordance with the respective number
of Units owned (and, in the case of items arising out of certain sales or other
dispositions with respect to which certain holders may be treated as owning
Contingent Units, the number of Contingent Units deemed owned). Under section
706(d) of the Code, if in any taxable year there is a change in any MGI
Unitholder's number of Units owned, the holder's distributive share must take
into account the varying numbers of Units held by each holder of Units during
such taxable year.
The LLC Agreement provides that, in accordance with section 704(c) of
the Code and the Treasury Regulations, items of income, gain, loss, deduction
and credit with respect to any property contributed to the capital of the Parent
by a holder of Units (which would include the MGI Common Stock received pursuant
to the Merger Exchange) will be allocated, for federal income tax purposes,
among the holders of Units so as to take into account any variation between the
holder's adjusted tax basis in such property at the time of its contribution and
its initial book value as reflected on the books and records of the Parent. (See
also the discussion below under the heading "Ownership of Units--Distributions
by the Parent".) The LLC Agreement sets forth the method for allocating such
items among the holders of Units. The LLC Agreement further provides that the
initial book value of the MGI Common Stock received by the Parent pursuant to
the Merger will be equal to the number of Units received in exchange therefor
multiplied by the value per Unit as of the date of the Merger.
Because determination of such allocations will depend in large part
upon facts existing in the future, there can be no assurance that the
allocations of the Parent's items of income, gain, loss, deduction and credit
provided for under the LLC Agreement will be respected under
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MCM Group, Inc. 8 January 20, 1998
the Code and the Treasury Regulations, and we cannot provide an opinion on this
issue.
The LLC Agreement provides that the Parent will use its reasonable best
efforts to send, no later than 60 days after the end of each taxable year, to
each person who held Units at any time during such taxable year, a schedule
showing such person's distributive share of the Parent's items of income, gain,
loss, deduction and credit and such additional information as may be necessary
for the filing of such person's federal income tax return, including the
Schedule K-1 for such person filed with the IRS with the Parent's federal income
tax return. Under section 6222 of the Code, each MGI Unitholder will be required
to treat each such item in a manner that is consistent with the treatment of
such item on the Parent's return or to file with the holder's own federal income
tax return a statement identifying each inconsistency.
Under section 704(d) of the Code, an MGI Unitholder's distributive
share of any loss of the Parent will be allowed as a deduction only to the
extent of the adjusted tax basis of the holder's Units at the end of the
Parent's taxable year in which the loss occurred (see below under the heading
"Ownership of Units--Adjusted Tax Basis of Units"). Any excess of such loss over
such basis will be carried over and allowed as a deduction when the holder has
sufficient basis to deduct such excess.
DISTRIBUTIONS BY THE PARENT
In general, if the Parent is classified as a partnership for federal
income tax purposes (as discussed above under the heading "Classification of the
Parent"), an MGI Unitholder who receives a distribution from the Parent will not
recognize gain upon the distribution, except to the extent that the sum of any
cash distributed and any decrease in the holder's share of the Parent's
liabilities under section 752 of the Code exceeds the adjusted tax basis of the
holder's Units immediately before the distribution (see below under the heading
"Ownership of Units--Adjusted Tax Basis of Units"). Under certain circumstances,
the distribution of "marketable securities" is treated as a distribution of cash
under section 731(c) of the Code. An MGI Unitholder who receives a distribution
from the Parent will
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MCM Group, Inc. 9 January 20, 1998
not recognize loss upon the distribution, except that upon a distribution in
complete redemption of the holder's Units where no property other than cash,
unrealized receivables and inventory (within the meaning of section 751 of the
Code) is distributed to the holder, the holder will recognize loss to the extent
of the excess of the adjusted tax basis of the holder's Units immediately before
the distribution over the sum of any cash distributed, any decrease in the
holder's share of the Parent's liabilities under section 752 of the Code and the
adjusted tax basis of any unrealized receivables and any inventory distributed.
Any gain or loss recognized will be treated as gain or loss from the sale or
exchange of the holder's Units (see below under the heading "Disposition of
Units").
Certain exceptions to the general rule that an MGI Unitholder will not
recognize gain or loss upon a distribution from the Parent exist. If a holder
were to perform services for the Parent or transfer property to the Parent, and
if the distribution were treated as directly or indirectly related to such
performance of services or such transfer of property, then the amount
distributed could be recharacterized as having been paid as compensation for
such services or in exchange for such property under section 707(a)(2)(A) of the
Code.
In addition, if a holder contributes any property to the capital of the
Parent (which would include the MGI Common Stock received pursuant to the Merger
Exchange), and the holder's adjusted tax basis in such property at the time of
its contribution is not equal to its initial book value as reflected on the
books and records of the Parent (as discussed above under the heading "Ownership
of Units--Allocation of the Parent's Income, Gain, Loss, Deduction and Credit"),
then (I) under section 704(c)(1)(B) of the Code, the holder may recognize gain
or loss if the Parent distributes the contributed property to one or more other
holders of Units within seven years of the date of contribution, and (II) under
section 737 of the Code, the holder may recognize gain (but not loss) if the
Parent distributes other property to the holder within seven years of the date
of contribution.
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MCM Group, Inc. 10 January 20, 1998
ADJUSTED TAX BASIS OF UNITS
If the Parent is classified as a partnership for federal income tax
purposes (as discussed above under the heading "Classification of the Parent"),
the adjusted tax basis of the Units in the hands of an MGI Unitholder will equal
the initial tax basis of such Units (as discussed above under the heading
"Receipt of Units in Exchange for MGI Common Stock"), (I) increased by any
additional cash or the adjusted tax basis of any additional property contributed
to the Parent by the holder (including any increase in the holder's share of the
Parent's liabilities under section 752 of the Code) and the sum of the holder's
distributive share of the Parent's income and gains and any income of the Parent
that is exempt from tax, and (II) decreased by any distributions made to the
holder by the Parent (including any decrease in the holder's share of the
Parent's liabilities under section 752 of the Code, except for any such decrease
occurring in connection with the disposition of Units) and the sum of the
holder's distributive share of the Parent's losses and deductions and any
expenditures of the Parent that are neither deductible nor properly
capitalizable.
IF THE PARENT WERE CLASSIFIED AS AN ASSOCIATION TAXABLE AS A CORPORATION
If the Parent were classified as an association taxable as a
corporation for federal income tax purposes (as discussed above under the
heading "Classification of the Parent"), the Parent would be subject to federal
income tax at the rates applicable to corporations. As a result, the Parent's
items of income, gain, loss, deduction and credit would be reflected only on its
own tax return. The MGI Unitholders would not be required to take such items
into account in computing the holders' own taxable income, and neither such
items nor the liabilities of the Parent would affect the tax basis of the Units.
Instead, the holders of Units would be taxable in the same manner as
shareholders of a corporation. In general, an MGI Unitholder receiving a
distribution from the Parent would recognize ordinary dividend income to the
extent of the Parent's current and accumulated earnings and profits.
Distributions in excess of the Parent's current and accumulated earnings and
profits would first be treated as a nontaxable return of capital to
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MCM Group, Inc. 11 January 20, 1998
the extent of the adjusted tax basis of the holder's Units and then as gain from
the sale or exchange of the Units. We note that the imposition of tax on the
Parent would reduce the amount of distributions that could be made to the
holders of Units.
DISPOSITION OF UNITS
An MGI Unitholder will recognize gain or loss on the sale or exchange
of Units equal to the difference between the amount realized (which will include
any decrease in the holder's share of the Parent's liabilities under section 752
of the Code if the Parent is classified as a partnership for federal income tax
purposes (as discussed above under the heading "Classification of the Parent"))
and the adjusted tax basis of the holder's Units disposed of. See also the
discussion above under the headings "Ownership of Units--Adjusted Tax Basis of
Units" and "--If the Parent Were Classified as an Association Taxable as a
Corporation".
If the Units are a capital asset in the hands of the holder at the time
of the sale or exchange, the gain or loss will be treated as capital gain or
loss, except, if the Parent is classified as a partnership for federal income
tax purposes (as discussed above under the heading "Classification of the
Parent"), to the extent attributable to unrealized receivables or inventory of
the Parent, within the meaning of section 751 of the Code. Such capital gain or
loss will be treated as long-term capital gain or loss if the holding period for
such Units is more than one year. In the case of a holder who is an individual,
the rate of tax applicable to any such gain will be reduced if the holding
period for such Units is more than 18 months.
* * * * *
This opinion is expressly limited to the matters set forth above, and
we express no opinion, whether by implication or otherwise, as to any other
matters.
This opinion is based on the relevant law in effect (or, in the case of
proposed Treasury Regulations, proposed) and the relevant facts that exist as of
the date hereof, and we disclaim any undertaking to advise you, the
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MCM Group, Inc. 12 January 20, 1998
Parent or any other person of any changes in applicable law that may occur after
the date hereof, or of any facts, circumstances, events or developments that
hereafter may be brought to our attention that could alter, affect or modify
this opinion.
We are delivering this opinion to you in connection with the
preparation and filing of the Registration Statement. This opinion is solely for
your benefit and for the benefit of the Parent, and, without our prior written
consent, no person other than you and the Parent is entitled to rely on this
opinion, and this opinion may not be furnished, in whole or in part, to any
other person except as provided in the last paragraph hereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Information
Statement/Prospectus that constitutes a part of the Registration Statement,
under the headings "The Merger and the Exchange--Federal Income Tax
Considerations" and "Legal Matters". In giving such consent, we do not thereby
concede that we are within the category of persons whose consent is required
under section 7 of the Securities Act of 1933, as amended, or the Rules and
Regulations of the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ DEBEVOISE & PLIMPTON