Taiyo Hawaii Company, Ltd. - Page 21

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          accountant's (Tsukamoto's) after-the-fact testimony that, in                
          retrospect, he should have considered the advances as equity and            
          reported them as such on petitioner's tax returns.                          
               Petitioner's approach does not show that the substance of              
          the advances was not loans.  It merely illustrates that the                 
          parties to the transactions did not follow all of the formalities           
          that might be considered probative that the advances were debt              
          rather than equity.  In that regard, petitioner has not shown               
          that the form of the transaction did not comport with its                   
          substance.  We must take into consideration here the fact that              
          both petitioner and its parent were corporations formed under the           
          laws of Japan and that they are foreign entities conducting                 
          business in the United States.  Additionally, when the "home                
          office" (foreign parent corporation's office) was asked for                 
          evidence of the indebtedness, it provided a foreign language                
          document, which was translated to reflect the title                         
          "Confirmation/Acknowledgment" and contained a list of advances              
          and dates made.  With respect to each advance, the document                 
          indicates that "Payment of principal is the priority" and that              
          the rate of payment is "Short-term prime".  These descriptive               
          terms are indicative of debt and interest rather than equity or             
          capital.                                                                    


               10(...continued)                                                       
          Ventures, Inc. v. Commissioner, T.C. Memo. 1995-155.                        




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