- 80 -
business purpose is fatal. Id.
After reviewing Comdisco’s equipment leasing concept, see
supra pp. 10-12, and the economic effect of the transaction, we
conclude that the insertion of Andantech into the sale-leaseback
transaction involved herein served no valid nontax business purpose
and was devoid of any economic substance. Regardless of which test
is used under the step transaction doctrine, the facts in this case
require us to reach the same result.
If the sole purpose of a transaction with a foreign entity “is
to dodge U.S. taxes, the treaty cannot shield the taxpayer from the
fatality of the step-transaction doctrine. For a taxpayer to enjoy
the treaty’s tax benefits, the transaction must have a sufficient
business or economic purpose.” Del Commercial Props., Inc. v.
Commissioner, supra at 213-214; see also Gaw v. Commissioner, T.C.
Memo. 1995-531, affd. without published opinion 111 F.3d 962 (D.C.
Cir. 1997). The foreign entity must serve a role with a sufficient
business or economic purpose to overcome the conduit nature of the
transaction. Del Commercial Prop., Inc. v. Commissioner, supra at
215.
In this case, the creation of Andantech-Foreign did not
appreciably affect Norwest’s interests in the sale-leaseback
arrangement, except to reduce its U.S. tax. Andantech-Foreign’s
sole purpose was to enable Norwest to obtain the benefits of an
exemption established by treaty for income attributable to the sale
of the Comdisco rents. And a tax-avoidance motive standing by
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