-62-
We acknowledge that due to the Brazilian debt crisis,
petitioner had limited options with regard to its blocked
deposits. However, once petitioner decided to engage in a debt-
equity transaction, it was free to use its blocked deposits to
invest in any Brazilian company. Moreover, the value of the
cruzados here was enhanced because petitioner's investment was
made at the official exchange rate, entitling it to the benefits
of registered foreign capital. In sum, as in G.M. Trading, we
hold that the restriction on use of the cruzados herein does not
require a discount.
The second restriction involved the 12-year repatriation
restriction. It is clear from the record before us that this
restriction was a preexisting limitation, as articulated in
Central Bank Circular 1.492 and the 1986 DFA. It was not a result
of negotiations or bargaining by the parties. The restriction
reduced the value of petitioner's property right by prohibiting
petitioner from repatriating its capital for 12 years. Despite
the manner in which petitioner arranged the transaction (with the
creation of MOIL and MRC), we believe that the 12-year restriction
warrants a discount on the fair market value of the cruzados
petitioner received, reflecting the preexisting restriction. See,
e.g., Landau v. Commissioner, 7 T.C. 12, 16 (1946) (the Court
imposed a discount on the value of South African pounds,
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