121 T.C. No. 11
UNITED STATES TAX COURT
SQUARE D COMPANY AND SUBSIDIARIES, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6067-97. Filed September 26, 2003.
P was a publicly held U.S. corporation and, after
its acquisition by a foreign corporation (S) through a
reverse subsidiary merger, was a U.S. corporation
indirectly owned by S, during the years in issue.
To finance the acquisition of P, S obtained a
commitment from two banks to extend loans to a to-be-
organized subsidiary equal to one-half the acquisition
price, not to exceed $1.125 billion. The subsidiary
was created for the purpose of acquiring P. It was to
use the loan proceeds to purchase P’s outstanding
shares, at which time it would merge into P and cease
to exist. As consideration for the banks’ commitment,
S became obligated to pay the banks a loan commitment
fee and to indemnify the banks for any legal fees
incurred in connection with their agreement to extend
credit for the acquisition. The subsidiary formally
assumed S’s obligations with respect to the banks’
legal fees and became obligated to pay a portion of the
loan commitment fees. After initially resisting the
acquisition, P agreed to it and as a consequence of the
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