- 41 - approximately 18 months before it was closed. In a basic back- to-back operation, a client’s funds deposited with LTD were used as collateral for loans to a related client account. More specifically, the mechanism took the following form: a client, usually a Mexican corporation, placed U.S. dollars in LTD's MMA II fund. The money was then lent to the owner of the client corporation (MMA II notes). The dollars were exchanged by the owner of the client corporation into pesos, and the pesos were used to buy Mexican Treasury bills or "cetes", which were lent to the client corporation. The Treasury bills were sold by the client corporation and exchanged into dollars, and the dollars were deposited into the client corporation's MMA II fund with LTD. LTD charged its client corporations 1 percent more for the loan than the interest rate paid on the MMA II notes. One of LTD’s "Direct Costs" of its interest income is an item entitled "Interest Expense - Special Accounts". Such expense represents the amount that LTD paid to LTD accounts such as, inter alia,7 FEIM Fund, Currency Fund, and TVA, for their positions in, inter alia, Eurodeposits, IFF, Pace Investments, and InverCedes. The gross receipts and direct costs relating to LTD’s "Interest Income" for each taxable year are as follows: 7 We note that LTD had more investment products and investment funds during the taxable years in issue than the parties have addressed.Page: Previous 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Next
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