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* * *
In these circumstances, where the transfer of
* * * the notes * * * left Industrias with the same
inflow and outflow of funds and where * * * [all
involved] were * * * members of the same corporate
family, we cannot find that this transaction had any
valid economic or business purpose. Its only purpose
was to obtain the benefits of the exemption established
by the treaty for interest paid by a United States
corporation to a Honduran corporation. While such a
tax-avoidance motive is not inherently fatal to a
transaction, see Gregory v. Helvering, * * * [293 U.S.
465, 469 (1935)], such a motive standing by itself is
not a business purpose which is sufficient to support a
transaction for tax purposes. See Knetsch v. United
States, 364 U.S. 361 (1960); Higgins v. Smith, 308 U.S.
473 (1940); Gregory v. Helvering, supra.
The fact that the transaction was entirely between related
parties was important to our conclusion that it was void of any
"economic or business purpose." Aiken Indus., Inc. v.
Commissioner, supra at 934. In contrast, Finance borrowed funds
from unrelated third parties (the Euronote holders) who were
willing to enforce their rights over both Finance and petitioner.
The Euronote holders would not have lent money to petitioner.
Finance was therefore created to borrow money in Europe and then
lend money to petitioner in order to comply with the requirements
of prospective creditors, a business purpose of the kind
recognized by the Supreme Court in Moline Properties, Inc. v.
Commissioner, 319 U.S. 436 (1943).
The instant case is also distinguishable from Aiken Indus.,
because Finance's borrowing and lending activity was a business
activity that resulted in significant earnings for Finance.
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