Claymont Investments, Inc., As Successor in Interest to New CCI, Inc. and Subsidiaries - Page 2

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               not entitled to the sec. 165, I.R.C., loss deductions,                 
               interest expense deduction, or deferral of foreign                     
               exchange gain.                                                         
               1.   Held:  P did not establish that it had a tax basis                
               in each of the three terminated relationships and,                     
               thus, is not entitled to deduct losses related to these                
               2.   Held, further, R’s section 482, I.R.C.,                           
               adjustments, relating to the intercompany transaction,                 
               are arbitrary and capricious.                                          
               3.   Held, further, the economic substance doctrine is                 
               4.   Held, further, pursuant to sec. 1.1502-13, Income                 
               Tax Regs., P is entitled to defer foreign exchange gain                
               relating to the intercompany transaction between S2 and                

               William E. Bonano, Richard E. Nielsen, and Annie Huang                 
          (specially recognized), for petitioners.                                    
               James P. Thurston, Kevin G. Croke, and Usha Ravi, for                  

                       MEMORANDUM FINDINGS OF FACT AND OPINION                        

               FOLEY, Judge:  The issues for decision are whether:                    
          (1) Petitioners’1 claimed losses relating to customer                       

               1  All references to petitioners are to Claymont                       
          Investments, Inc., and its consolidated subsidiaries.  All                  
          references to petitioner are to Claymont Investments, Inc.                  

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Last modified: May 25, 2011