- 106 -
tion], or its foreign affiliate. [Fn. ref. omitted.]
Respondent contends that the end result test is satisfied be-
cause--
at the time the deposits [of the foreign corporations
pledging collateral] were made, BOT and Radcliffe
intended to obtain loans in amounts equal to the cor-
responding deposits, with tax avoidance as the planned
outcome of the two steps. The Foreign Corporations
[pledging collateral] made the deposits intending to
make funds of an equal amount available to BOT and
Radcliffe without incurring any U.S. tax liabilities.
BOT and Radcliffe borrowed the funds intending to incur
interest expense to reduce their respective current and
future U.S. tax liabilities. All the parties intended
that BOT and Radcliffe obtain loans from related off-
shore parties and that interest be paid offshore with
no tax consequences to the recipients of the interest.
Respondent further argues that, in addition to attempting to
allow the foreign corporations pledging collateral to escape tax
on the interest that, in substance, was paid to them by Radcliffe
or BOT, the Bank transactions attempted to enable Radcliffe and
BOT to shelter their respective income from tax for the years at
issue by generating interest deductions.
Presumably because the relationships of the persons involved
in a transaction are factors that we may consider in deciding
whether the transaction should be recharacterized for Federal tax
purposes, respondent advances certain contentions concerning the
relationships of the persons involved in the Bank transactions.
In this connection, respondent acknowledges that during the years
at issue the banks in question (1) were engaged in commercial
banking and therefore were cognizable for Federal tax purposes
under Moline Properties, Inc. v. Commissioner, 319 U.S. 436
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