- 18 - [restructuring them] as two or more successive below- market loans (“deemed loans”) * * *, as follows: (i) A deemed below-market loan made by the named lender to the indirect participant [e.g., a shareholder of the lender]; and (ii) A deemed below-market loan made by the indirect participant to the borrower [third party or nonshareholder]. Sec. 1.7872-4(g)(1)(i) and (ii), Proposed Income Tax Regs., 50 Fed. Reg. 33561 (Aug. 20, 1985). Where one corporation makes a loan to another under common control, the proposed regulations restructure it as a loan from the lending corporation to its parent followed by a loan from the parent to the borrowing entity. Thus the proposed regulations treat the entire loan as being made first to the shareholder(s) of the lender. The proposed regulations do not directly address the questions, raised by petitioner, concerning whether a nonshareholder would be subject to section 7872 under the facts before us or how the nonshareholder would be treated in connection with any benefit received from the receipt of a below- market loan by the borrowing entity.6 Although those questions are raised and argued by petitioner, we do not have before us 6 The remainder of the proposed regulations concerning indirect loans contains some examples and focuses on the following situations: (1) Applying sec. 7872 separately to each deemed loan, and (2) dealing with circumstances where intermediaries are used to “avoid the application of section 7872(c)(1)(A), (B), or (C)”. Sec. 1.7872-4g(2), Proposed Income Tax Regs., 50 Fed. Reg. 35561 (Aug. 20, 1985).Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Next
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