CMI International, Inc., a Michigan Corporation - Page 2




                                        - 2 -                                         

               Lewis R. Mandel, and Trevor T. Wetherington, for respondent.           


               FOLEY, Judge:  By notice dated October 6, 1992, respondent             
          determined a $291,011 deficiency in petitioner's 1988 Federal               
          income tax.  The primary issue for decision is whether                      
          petitioner, pursuant to section 367(a), recognized gain relating            
          to the swap transaction.  We hold petitioner did not.  All                  
          section references are to the Internal Revenue Code in effect for           
          the year in issue.                                                          
                                  FINDINGS OF FACT                                    
               In the 1980's, the Mexican Government created a "debt-                 
          equity-swap" (swap) program that was designed to encourage                  
          foreigners to invest in Mexico and reduce the outstanding balance           
          of the Mexican Government's foreign-currency-denominated debt.              
          The program's swap transactions involved a series of prearranged            
          steps that were accompanied by extensive documentation.  In these           
          transactions, a U.S. investor could purchase an interest in the             
          Mexican Government's U.S.-dollar-denominated debt and, in                   
          exchange for stock, transfer such interest to its Mexican                   
          subsidiary.1  The debt would then be canceled, and the Mexican              
          Government would transfer pesos to the subsidiary.                          


               1  Compare G.M. Trading Corp. v. Commissioner, 121 F.3d 977,           
          979 (5th Cir. 1997), revg. 103 T.C. 59 (1994), supplemented by              
          106 T.C. 257 (1996), where the taxpayer transferred debt to the             
          Mexican Government in exchange for pesos.                                   




Page:  Previous  1  2  3  4  5  6  7  8  9  10  Next

Last modified: May 25, 2011