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Year Deficiency
1993 $4,196,196
1994 2,626,712
1995 307,496
1996 34,839,469
In the August 30, 2000, notice of deficiency, respondent,
pursuant to section 482, made adjustments to reflect the arm’s-
length interest rate applicable at the time of the assumption and
determined that petitioners should recognize the foreign exchange
gain realized in 1996. On November 6, 2000, the Court granted
the parties’ joint motion to consolidate docket Nos. 14384-99
(i.e., relating to 1993 through 1995) and 9129-00 (i.e., relating
to 1996) for purposes of trial, briefing, and opinion. In
respondent’s amendment to answer in docket No. 9129-00, filed
July 16, 2002, respondent asserted the economic substance
doctrine as an alternative theory in support of his determination
that the assumption agreement between CIC and CIHI should be
restructured.
Petitioner’s principal place of business was Claymont,
Delaware, at the time the petition was filed.
OPINION
I. The Valuation of Customer Relationships
Section 165(a) allows a deduction for a business loss
sustained during a year where the loss is not compensated for by
insurance or otherwise. The amount of a deduction pursuant to
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