-61-
blocked deposits on the secondary market, it probably would have
been obligated to make new loans to Brazil, petitioner anticipated
receiving a "better deal" through the debt-equity conversion.
Our analysis does not, however, end here. We must now
determine whether any discount should be applied to the fair
market value of the cruzados petitioner received on account of the
restrictions in this case.
Two restrictions existed with regard to petitioner's debt-
equity conversion. The first required petitioner to invest the
cruzados in a Brazilian company. This restriction has no greater
significance than the restrictions placed upon the taxpayer's use
of the pesos by the Mexican Government in G.M. Trading. The Court
in G.M. Trading declined to discount the value of the pesos
received in exchange for the debt on the grounds that the Mexican
Government restricted their use to the construction of the
processing plant. The Court held that this restriction was
consistent with the parties' purpose and objective and was not
substantially different from disbursements of loan proceeds by
financial institutions. 106 T.C. at 262. In other words, the
restriction only reflected the foreign currency's intended use.
103 T.C. at 70-71. In fact, the restriction served as an
enhancement to the value of the pesos by opening business
opportunities for the taxpayer in Mexico. 106 T.C. at 264.
Page: Previous 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 NextLast modified: May 25, 2011