Taiyo Hawaii Company, Ltd. - Page 19

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          Respondent, however, raises the threshold question of whether               
          petitioner should be allowed to disavow the form of the                     
          transaction, which was cast as debt.  In this regard, respondent            
          agrees that if we find the advances were equity (and not debt),             
          the matter would be resolved in petitioner's favor.  Petitioner             
          bears the burden of proof.  Rule 142(a); Welch v. Helvering, 290            
          U.S. 111 (1933).  If we find that the transaction was cast as               
          debt, then it would be more difficult for petitioner to disavow             
          the form and successfully show that the advances were equity in             
               Respondent contends that, prior to the audit, petitioner               
          treated the advances for financial purposes and tax reporting as            
          loans or debt.  Petitioner counters that, irrespective of the               
          labels originally attached to the advances, they were, in                   
          substance, capital contributions.  Petitioner argues that it is             
          entitled to disavow the form of its transaction.9                           
               Taxpayers are free to structure their transactions in a                
          manner that will result in their owing the least amount of tax              
          possible.  However, the Supreme Court observed in Commissioner v.           

               9  In support of its argument, petitioner, cites J.A. Tobin            
          Constr. Co. v. Commissioner, 85 T.C. 1005 (1985); Georgia-Pac.              
          Corp. v. Commissioner, 63 T.C. 790 (1975); J.A. Maurer, Inc. v.             
          Commissioner, 30 T.C. 1273 (1958); LDS, Inc. v. Commissioner,               
          T.C. Memo. 1986-293; Inductotherm Indus., Inc. v. Commissioner,             
          T.C. Memo. 1984-281, affd. without published opinion 770 F.2d               
          1071 (3d Cir. 1985).                                                        

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