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for the Spanish investors to receive corporate distributions tax
free.
We examined similar facts in Erhard v. Commissioner, T.C.
Memo. 1991-290, modified by T.C. Memo. 1992-376, supplemented by
T.C. Memo. 1993-25, affd. 46 F.3d 1470 (9th Cir. 1995), where we
concluded:
Moreover, the record clearly shows that the money
movement technique made possible a group of
transactions with a total value far in excess of the
actual cash involved. The circular money movements
here involved generally began and ended with system
entities, with no change in the economic position of
the system viewed as a whole. Quite often, the money
movements occurred in a single day. The stream of
money flowing through the intermediate entities,
supported by mere bookkeeping entries or by the devices
of back to back loans, was without economic substance.
See Karme v. Commissioner, supra.
We found that the circular money movement amounted to a sham in
substance and underscored a complete lack of economic substance
to support an interest expense deduction. Erhard v.
Commissioner, supra.
Petitioners attempt to distinguish the instant cases from
the other circular money movement cases. They argue that, in the
instant cases, there is real value underlying the lump-sum
royalty payments. Petitioners contend that the real value
consisted of the right to use the payee's valuable intangibles
for an extended period. As we concluded earlier, Manver did not
own or transfer the intangibles, and, therefore, petitioners
could have used the intangibles without paying Manver.
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