Claymont Investments, Inc., As Successor in Interest to New CCI, Inc. and Subsidiaries - Page 18

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          $50 million to CIC.  Thus, the Holdings/CIC transaction and the             
          CIC/CIHI transaction must be analyzed separately.  See sec.                 
          1.482-1(f)(2)(i), Income Tax Regs. (stating transactions will be            
          analyzed on a transaction by transaction basis unless “such                 
          transactions, taken as a whole, are so interrelated that                    
          consideration of multiple transactions is the most reliable means           
          of determining the arm’s length consideration for the controlled            
                    1.   Holdings/CIC Transaction                                     
               In 1988, Holdings lent �29,498,525 (i.e., $50 million) to              
          CIC at an 11.5-percent interest rate.  Both parties agree that,             
          at the time of the loan, 11.5 percent was an arm’s-length                   
          interest rate.  Thus, section 1.482-2(a)(1), Income Tax Regs., is           
          inapplicable to the Holdings/CIC transaction.                               
                    2.   CIC/CIHI Transaction                                         
               CIC and CIHI, petitioner’s subsidiaries, are members of the            
          same consolidated group.  In 1996, CIC and CIHI executed an                 
          assumption agreement in which CIHI agreed to assume all of CIC’s            
          obligations, pursuant to the note, in exchange for $49,784,881.             
          Both parties agree that, at the time of the transfer, CIHI could            
          have borrowed the $49,784,881 at an arm’s-length rate of 8,                 
          rather than the 11.5, percent.  Pursuant to the assumption                  
          agreement, if CIHI failed to make any of its payments, CIC was              
          entitled to seek legal recourse against CIHI.  Section 1.482-               

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