- 199 -
With respect to the Horbury transaction, petitioner has not
shown that the interest at issue in the Horbury transaction is
exempt from U.S. taxation under article VIII(1) because it was
paid on a loan made before October 15, 1984, and therefore qual-
ifies for the grandfathering provided by Rev. Rul. 85-163, supra.
Indeed, the record is virtually devoid of any reliable evidence
relating to that transaction. On the instant record, we find
that petitioner has failed to show that BOT had no reason to
expect that its payment of the interest at issue in the Horbury
transaction was subject to withholding tax.148
Petitioner's suggestion on brief that Radcliffe and BOT
relied on advisers is not supported by the record. Petitioner
has not shown that an accountant, attorney, or other adviser gave
advice to Radcliffe and BOT regarding their respective withhold-
ing obligations with respect to the Bank transactions. Nor has
petitioner shown that counsel gave advice to petitioner's father
concerning whether Horbury might be treated as a conduit for
withholding tax purposes or that an accountant, attorney, or
148 Petitioner does not argue that BOT had no reason to expect
that the interest at issue in the Horbury transaction was subject
to withholding because that interest satisfied the express
provisions of article VIII(1). In any event, in 1984, when that
interest was paid, application of the substance over form doc-
trine and related principles in order to ignore or recharacterize
the role of a person in a transaction was not unprecedented.
See, e.g., Aiken Indus., Inc. v. Commissioner, 56 T.C. 925, 933-
934 (1971).
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