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Bausch & Lomb, Inc. v. Commissioner, 92 T.C. 525, 582 (1989),
affd. 933 F.2d 1084 (2d Cir. 1991).
A. The Applicability of Section 1.482-2(a)(1), Income Tax
Regs., to the Holdings/CIC Transaction or CIC/CIHI
Transaction
Section 482 allows the Commissioner to make adjustments to
reflect an arm’s-length rate of interest “Where one member of a
group of controlled entities makes a loan or advance * * * or
otherwise becomes a creditor of, another member of such group and
* * * charges interest at a rate which is not equal to an arm’s
length rate of interest”. Sec. 1.482-2(a)(1)(i), Income Tax
Regs.; Latham Park Manor, Inc. v. Commissioner, 69 T.C. 199, 210-
211 (1977), affd. without published opinion 618 F.2d 100 (4th
Cir. 1980).
Section 1.482-1(i)(7), Income Tax Regs., broadly defines a
transaction as “any sale, assignment, lease, license, loan,
advance, contribution, or any other transfer of any interest in
or a right to use any property * * * or money”. Because the
Holdings/CIC transaction was a loan and CIC/CIHI transaction
involved a transfer of an “interest in or a right to use * * *
money”, both transactions meet that definition. The Holdings/CIC
and CIC/CIHI transactions, however, are separate transactions.
The CIC/CIHI transaction was entered into 8 years after the
Holdings/CIC transaction, and there is no evidence that this
transaction was under consideration at the time Holdings lent the
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