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In structuring and implementing the disputed transaction,
petitioner was not motivated by any nontax business purpose;
petitioner’s sole intention was to generate a tax benefit in the
form of foreign tax credits. The disputed transaction resulted
in no change in the economic position of either petitioner or
ITC.16 Petitioner did not have any benefits or burdens associ-
ated with the preferred stock that ITC purportedly issued to it.
The purported issuance to petitioner of ITC’s preferred stock was
but one fleeting, transitory step in the disputed transaction
that was undertaken so that ITC could purportedly immediately
redeem that stock, thereby enabling petitioner to claim that such
redemption resulted in a dividend to it under sections 302 and
16With respect to whether the disputed transaction resulted
in any change in the economic position of petitioner or ITC, Mr.
Saunders testified as follows:
Q InterTAN Canada’s [ITC’s] financial position
before this transaction began was exactly the same as
it was after this transaction began. Correct?
A That’s correct.
Q InterTAN U.S.’s [petitioner’s] financial
position before this transaction began was exactly the
same as its financial condition after this transaction
began.
A Except for the deemed foreign tax credits.
Yes.
Q Other than--of course, other than for tax
benefits, it was the same. Right?
A Yes.
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