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transaction, CMI-Texas paid US$1,125,000 for the rights to the
peso account and did not acquire a debt interest. Petitioner
further contends that the Agreement is ambiguous and that the
proper characterization of the transaction should be determined
by considering the events occurring after the parties executed
the Agreement.
The terms of the transaction unambiguously provide that CMI-
Texas acquired a debt interest, which it transferred to
Industrias in exchange for stock. CMI-Texas agreed to these
terms, and petitioner did not produce any evidence that would
allow reformation of their agreement. Accordingly, pursuant to
the Danielson rule, petitioner may not disavow the form of the
transaction and must accept the tax consequences resulting
therefrom. See generally Golsen v. Commissioner, 54 T.C. 742,
756-757 (1970), affd. 445 F.2d 985 (10th Cir. 1971) (indicating
that the Tax Court will generally follow the law as stated by the
Court of Appeals in the circuit to which the case is appealable).
Section 1001(c) provides that taxpayers generally recognize
gain realized on the sale or exchange of property. Though
section 351(a) allows the tax-free exchange of property from a
shareholder to its wholly owned subsidiary, section 367(a) may
deny such treatment if the transfer is from a domestic to a
foreign corporation. CMI-Texas' transfer of its debt interest in
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Last modified: May 25, 2011