- 61 -
to FCI. Respondent contends that Burndy-US paid, and thus
transferred excess value of, $3,926,430 to FCI for exchange rate
losses (hedging loss) that FCI incurred when the cost of yen
decreased after FCI bought the yen and before FCI paid the yen to
Furukawa and Sumitomo.
Petitioners contend that FCI did not receive excess value
from Burndy-US because Burndy-US ultimately received the 40-
percent interest in Burndy-Japan. Petitioners contend that the
exchange rate losses due to the reduced cost of yen were Burndy-
US’s losses and not FCI’s. We disagree. FCI and Burndy-US
structured the transaction so that FCI and not Burndy-US bought
the yen, paid it to Furukawa and Sumitomo, and received the 40-
percent interest in Burndy-Japan. Petitioners now seek to recast
the form of the transaction as if Burndy-US, and not FCI, had
bought the yen, paid it to Furukawa and Sumitomo, and received 40
percent of the stock of Burndy-Japan. FCI and Burndy-US may not
do so because, ordinarily, taxpayers are bound by the form of the
transaction they have chosen; taxpayers may not in hindsight
recast the transaction as one that they might have made in order
to obtain tax advantages. Estate of Leavitt v. Commissioner, 875
F.2d 420, 423 (4th Cir. 1989), affg. 90 T.C. 206 (1988); see
Grojean v. Commissioner, 248 F.3d 572, 576 (7th Cir. 2001)
28(...continued)
equals �5,208,000,000. FF22,145,063 equaled $3,926,430 using the
Sept. 29, 1993, published conversion rate of FF5.6400 = $1.
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