Claymont Investments, Inc., As Successor in Interest to New CCI, Inc. and Subsidiaries - Page 24

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          and wanted to delay repayment of the note to take advantage of              
          the favorable fluctuations in the currency exchange rates.                  
          Respondent failed to adequately refute either purpose.  See Frank           
          Lyon Co. v. United States, 435 U.S. 561, 583-584 (1978) (genuine            
          multiple-party transactions with economic substance compelled by            
          business realities, imbued with tax-independent considerations,             
          and shaped not solely by tax avoidance features should be                   
          respected for tax purposes); IRS v. CM Holdings, Inc., supra at             
               C.   Deferral of Foreign Exchange Gain                                 
               Section 1.1502-13(a)(2), Income Tax Regs., provides that               
          members of a consolidated group can generally defer the                     
          recognition of gain relating to intercompany transactions until             
          entering into a transaction with a nonmember.  In 1996, CIC could           
          have retired the note by paying $49,784,881 to Holdings.  Upon              
          repayment of the note, CIC would have recognized a $4,188,791               
          foreign exchange gain (i.e., on June 28, 1996, CIC could have               
          repaid the principal balance of �29,498,525 with $45,811,209                
          rather than $50 million).  See sec. 988(a).  This gain, however,            
          was deferred, until 1997, as a result of the CIC/CIHI                       
          transaction.  Consistent with our holding, respondent was not               
          authorized, pursuant to section 482 or the economic substance               
          doctrine, to restructure the assumption as the repayment of the             
          loan by CIC, a member of petitioner’s consolidated group, to                

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