Claymont Investments, Inc., As Successor in Interest to New CCI, Inc. and Subsidiaries - Page 16

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          MGM/UA.  See Newark Morning Ledger Co. v. United States, supra at           
          566; Capital Blue Cross & Subs. v. Commissioner, 122 T.C. 224,              
          248 (2004).  Moreover, we are unable to ascribe to any of the               
          relationships a limited useful life of a specific duration.  Cf.            
          Capital Blue Cross & Subs. v. Commissioner, supra at 255-257.               
          Accordingly, we sustain respondent’s determinations disallowing             
          petitioners’ claimed deductions.                                            
          II. Tax Consequences of the Loan Assumption                                 
               Respondent, relying on section 482, contends that the                  
          CIC/CIHI transaction was not arm’s length and should be:                    
               recast * * * [as] a payment by CIC of $49,784,881 to                   
               Holdings to fully extinguish its debt followed by a new                
               loan from Holdings to CIHI in the same amount at the                   
               arm’s length rate of 8%.  The excess 3.5% interest paid                
               by CIHI to Holdings should be disallowed as a deduction                
               and deemed distributed by CIHI to Petitioner and by                    
               Petitioner to Carlton followed by a constructive                       
               contribution of this amount by Carlton to Holdings.                    
               Under section 482, the Commissioner has the authority to               
          reallocate income among members of a controlled group where a               
          controlled taxpayer’s taxable income is not equal to what it                
          would have been had the taxpayer been dealing at arm’s length               
          with an uncontrolled taxpayer.  Sec. 1.482-1(f)(1), Income Tax              
          Regs.  If the Commissioner, however, abuses his discretion and              
          makes a determination that is arbitrary, capricious, or                     
          unreasonable, that determination will not be sustained.  See                
          Seagate Tech., Inc. v. Commissioner, 102 T.C. 149, 164 (1994);              

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