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involved the conduit concept, we think they provide some guidance
for our disposition of the instant case. We take this view
because the flow-through characterization concept is, in a very
real sense, the conduit concept albeit in a somewhat different
garb, i.e., whether the U.S. source income is being received as
such, because of the status of the paying entity in one case, and
the status of the subject matter of the payment in the other.
In Aiken Industries, Inc. v. Commissioner, supra, back-to-
back loans, in the identical amounts of principal and rates of
interest, were made between a U.S. corporation and a related
corporation organized under the laws of the Republic of Honduras,
and between the Honduran corporation and its indirect parent.
Respondent argued that the Honduran corporation should be
disregarded for tax purposes, and that the parent corporation
should be deemed the true owner and recipient of the interest
payment from the U.S. corporation. We held the Honduran
corporation to be a mere conduit for the passage of interest
payments and imposed withholding tax liability on the U.S.
corporation.
In Northern Indiana Public Service Co. v. Commissioner,
supra, the taxpayer, a domestic corporation, organized a finance
subsidiary incorporated in Curacao under the Commercial Code of
the Netherlands Antilles, (to which the U.S.-Netherlands treaty
applied) for the purpose of issuing notes in the Eurobond market.
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