Northern Indiana Public Service Company - Page 17

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            Respondent's reply brief then states that                                                 

                  in the case at bar, we are dealing with the question of                             
                  debt to equity ratio in the context of a controlled                                 
                  foreign corporation, a financing subsidiary.  The                                   
                  requirement of adequate capitalization serves as a                                  
                  major assurance that there is financial reality and                                 
                  substance to the transaction in the post Moline                                     
                  Properties, supra, era.  [Fn. ref. omitted.]                                        

            However, respondent cites no authority for this proposition, nor                          
            does she explain what factors should be used in determining the                           
            existence of "adequate capitalization" in this situation.  It                             
            would appear that this is an issue of first impression.                                   
                  There is nothing in Moline Properties, Inc. v. Commissioner,                        
            319 U.S. 436 (1943), upon which respondent can rely.  In that                             
            case, the taxpayer corporation was created and owned by an                                
            individual who had previously purchased real estate that he had                           
            mortgaged.  The investment proved unprofitable, and in order to                           
            avoid losing the property, the individual owner was required by                           
            his creditors to transfer title to the newly formed corporation                           
            and place the corporate stock in trust as collateral.  See Moline                         
            Properties, Inc. v. Commissioner, 45 B.T.A. 647 (1941), revd. 131                         
            F.2d 388 (5th Cir. 1942), affd. 319 U.S. 436 (1943).                                      
                  In Moline Properties, Inc. v. Commissioner, supra, the                              
            Supreme Court upheld the Commissioner's position that the                                 
            corporate entity to which the real estate was transferred must be                         
            recognized and pay tax on the profit realized when it sold the                            
            real estate.  There is nothing in Moline Properties that suggests                         




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