- 105 -
not to those banks. Respondent asserts that the banks in ques-
tion were used as mere conduits between the borrower (Radcliffe
or BOT) and the actual lender (one or more of those foreign
corporations) and that those banks served no purpose other than
to attempt to enable the foreign corporations pledging collateral
to escape tax on the interest that she alleges was, in substance,
paid to them by Radcliffe and BOT. The reason respondent es-
pouses for her position is that the foreign corporations pledging
collateral were "the ultimate source of the loans to BOT and
Radcliffe."
To support her position, respondent relies on two of the
three tests (viz., the binding commitment test and the end result
test)74 that courts have applied in determining whether to invoke
the step transaction doctrine. Respondent contends that the
binding commitment test is satisfied because--
petitioner, for each of the Foreign Corporations [pled-
ging collateral], made a binding commitment to the U.S.
banks [in question] to make funds available to the
banks [in question] for BOT and Radcliffe. In each
case the two separate transactions, a loan from the
U.S. bank [in question] and a deposit in a U.S. or
foreign bank, were linked by this binding commitment.
Neither aspect of the transaction would have occurred
without the other, and the completion of the loan side
of the transaction required the simultaneous completion
of the other side, that is, the deposit and pledge. In
the case of each loan to BOT or Radcliffe, there was a
corresponding deposit, made under a binding commitment,
in the same amount to either the U.S. bank [in ques-
74 Respondent does not argue that the Bank transactions are
subject to recharacterization under the interdependence test. We
therefore do not consider the application of that test to those
transactions.
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