- 136 -
B. Resolution of Certain Questions That
Relate Only to the Bank Transactions
1. Whether the Binding Commitment Test
of the Step Transaction Doctrine
Applies to Any of the Bank Transactions
Respondent relies upon both the binding commitment test and
the end result test of the step transaction doctrine in arguing
that each of the Bank transactions should be recharacterized as a
loan to Radcliffe or BOT, as the case may be, that was made by
one (and, in certain instances, more than one) of the foreign
corporations pledging collateral. We now address whether the
binding commitment test applies to any of the Bank transactions.
In Commissioner v. Gordon, 391 U.S. 83, 96-98 (1968), the
Supreme Court applied the binding commitment test with respect to
a series of transactions that were implemented over several
years. In the present cases, the various aspects of each of the
Bank transactions were implemented in one year, although the Bank
loans extended beyond the respective years in which they were
funded.
Based on our review of the entire record in these cases, we
find that the binding commitment test, the narrowest of the three
100(...continued)
Horbury transaction was, in substance, a loan to BOT from a
foreign corporation that was not entitled to the benefits of the
U.S.-Netherlands treaty, we would conclude that the failure of
BOT to withhold tax on the interest paid on such loan resulted in
the avoidance of tax regardless of the extent of the income tax
benefit conferred on BOT by the interest deduction generated by
that transaction.
Page: Previous 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 NextLast modified: May 25, 2011