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have been fruitless without a completion of the series of steps
(mutual-interdependence test). See id. at 1429-1430; Custom
Chrome, Inc. v. Commissioner, T.C. Memo. 1998-317, on appeal
(9th Cir., Nov. 9, 1998).
We have applied the step-transaction doctrine to disregard
the use of intermediaries and conduits for Federal tax purposes.
See Packard v. Commissioner, 85 T.C. 397, 420 (1985); D’Angelo
Associates, Inc. v. Commissioner, 70 T.C. 121, 129 (1978); Gaw v.
Commissioner, T.C. Memo. 1995-531, affd. without published
opinion 111 F.3d 962 (D.C. Cir. 1997).
Back-to-back loans similar to those involved herein between
U.S. corporations and related foreign corporations and between
the foreign corporations and their indirect foreign parent
corporations have been held to represent mere conduits for the
passage of interest payments, and in such situations we have
imposed withholding tax liability on the U.S. corporate payors.
See Aiken Indus., Inc. v. Commissioner, 56 T.C. 925, 934 (1971).
Respondent argues that in substance the interest payments in
issue made by Del Commercial were paid to Delcom Financial, a
Canadian taxpayer, with regard to the $14 million Royal Bank loan
and therefore that Del Commercial, under the U.S.-Canada Treaty,
is liable for a 15-percent withholding tax on the interest
payments.
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