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the Bank transactions structured them as loans to Radcliffe and
to BOT from the U.S. banks in question, rather than as direct
loans from the foreign corporations pledging collateral, in order
to avoid tax on the interest that would have been paid through
withholding by Radcliffe and by BOT had those transactions been
structured as direct loans.98
(2) Horbury Transaction
Although respondent does not expressly argue that petitioner
failed to establish a nontax, business purpose for the form of
the Horbury transaction, she does cite Aiken Indus., Inc. v.
Commissioner, 56 T.C. 925 (1971). We held in Aiken that, based
on the facts there involved, including the presence of only a tax
avoidance purpose for the form of the transaction at issue in
that case, the provisions of the applicable U.S.-Honduras income
tax convention did not apply to exempt from tax interest that
was, in form, paid to a Honduran corporation. Id. at 934. We
thus address whether petitioner has shown a nontax, business
purpose for the form of the Horbury transaction.
Based on our review of the entire record in these cases, we
98 We reject petitioner's position that under Frank Lyon Co. v.
United States, 435 U.S. at 583-584, the form of the Bank transac-
tions should be respected. In Frank Lyon Co. the Supreme Court
found that the form of the transaction at issue had a nontax,
business purpose. Here, petitioner has failed to establish a
nontax, business purpose for the form of any of the Bank transac-
tions. Moreover, a transaction may pass muster under the test of
Frank Lyon Co. v. United States, 435 U.S. at 583-584, and still
be recharacterized under the substance over form doctrine and
related principles. See Packard v. Commissioner, 85 T.C. 397,
419-422 (1985).
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