EFTA01903202.pdf

To: Jeffrey Epstein[jeevacation mail.com Cc: Kirschner, Elyse( Heller, Arnyi From: McCaffrey, Carlyn Sent: Sun 2/10/2013 3:16:52 PM Subject: RE: I agree (although at least one of my partners does not) that you can avoid the reach of section 2703 with a cash settled option. How would we price the option? Are call options on the stock publicly traded? How are dividends treated under the normal stock option? Here's how I understand your proposal. Step 1- LB buys stock from Trust (T) for $18. LB issues a $1B note to T bearing interest at X%. and secured by a lien on his art. We need to discuss what X should be. We also need to think about the mechanics which are made a little difficult by the fact that the stock is held in a partnership. We also need to think about the fact that much of his art is already subject to a lien held by US Trust. Step #2 - LB sells a 2 year call to T. The price for the call is $.1B (obviously, a rough estimate); the strike price is the current market price. Step #3 - During the 2 year period of the call, LB spends the $.18 on living expenses, taxes, art, etc. Step #4 -Alternative 1 - the $18 worth of stock is now worth $1.2 B. LB owes T .2 Billion. He issues a note to settle the option. No income tax consequences because of grantor trust rules. The trust is ahead but not as much as it would have been if it hadn't entered into the transaction but LB's spending needs have been taken care of. Step #4 - Alternative 2 - the $1B worth of stock is still worth $1B. LB owes T nothing. T has lost .1B, but LB's spending needs have been taken care of. Step#5 - LB sells another 2 year call to T, etc. EFTA_R1_00333879 EFTA01903202 There are no income tax consequences because of the grantor trust rules. What are the securities law consequences? Are any of these transactions covered by Rule 16b? Do these transactions have to be reported? Is this what you had in mind? Carlyn S. McCaffrey I Partner McDermott Will & Emery LLP I 340 Madison Avenue, New York, NY 10173 +1 212 547 5324 I [email protected] www.mwe.com From: Jeffrey Epstein [mailto:[email protected]] Sent: Saturday, February 09, 2013 8:11 PM To: McCaffrey, Carlyn Subject: i have reviewed the 2703 regs, i don't see the issue, if the trust buys an option, at market, today and the stock goes up, the stock gets valued at the fair market , but the cash settled option comes due reducing the value of the estate. , bringing the same net result. and even better if debra gets the stock with a step up, what am i misssing? The information contained in this communication is confidential, may be attorney-client privileged, may constitute inside information, and is intended only for the use of the addressee. It is the property of Jeffrey Epstein Unauthorized use, disclosure or copying of this EFTA_R1_00333880 EFTA01903203 communication or any part thereof is strictly prohibited and may be unlawful. If you have received this communication in error, please notify us immediately by return e-mail or by e-mail to jecvacationRgmail com, and destroy this communication and all copies thereof, including all attachments. copyright -all rights reserved **MM. *** ***Milk IRS Circular 230 Disclosure: To comply with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained herein (including any attachments), unless specifically stated otherwise, is not intended or written to be used, and cannot be used, for the purposes of (i) avoiding penalties under the Internal Revenue Code or (i) promoting, marketing or recommending to another party any transaction or matter herein. This message is a PRIVILEGED AND CONFIDENTIAL communication. This message and all attachments are a private communication sent by a law firm and may be confidential or protected by privilege. If you are not the intended recipient, you are hereby notified that any disclosure, copying, distribution or use of the information contained in or attached to this message is strictly prohibited. Please notify the sender of the delivery error by replying to this message, and then delete it from your system. Thank you. Please visit http://v.wN.mwe.comi for more information about our Firm. EFTA_R1_00333881 EFTA01903204