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dispositive factor in determining conduit status, constitute a
departure from the conventional substance-over-form approach.16
We think there is considerable doubt that Congress, having set
aside the otherwise applicable substance-over-form test for
determining a conduit, nevertheless intended substance-over-form
principles to govern the alternative “safe harbor” test provided
in DEFRA section 127(g)(3)(B). Instead, we think that Congress,
by articulating the standard with the somewhat cumbersome phrase
“[meeting] requirements which are based on the principles set
forth in” the listed rulings, intended to confine the applicable
principles to those that could be derived from the listed
rulings. Thus, we conclude that substance-over-form principles
apply in construing the relief available under DEFRA section
127(g)(3) only to the extent that such principles may fairly be
inferred from an examination of the listed rulings.
For this reason, we reject at the outset respondent’s
attempt to test the capitalization of Finance under case law
involving substance-over-form doctrine, circular cash-flows, the
step transaction doctrine, and similar theories. The cases
applying such doctrines are simply inapposite in determining the
16 The Commissioner acknowledged as much when he revoked the
listed rulings upon the expiration of the Interest Equalization
Tax in 1974, observing that there was no longer any rationale
“for treating finance subsidiaries any differently than other
corporations with respect to their corporate validity or the
validity of their corporate indebtedness.” Rev. Rul. 74-464,
1974-2 C.B. 46, 47.
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