-248-
paid no interest on the interest-bearing portion of the debt
obligations.174
With this backdrop in mind, we conclude that Credit Lyonnais
did not expect the $79 million principal amount of the receivable
to be repaid when it released New MGM from, and caused MGM Group
Holdings to assume, that debt obligation. Cf. Epic Associates
84-III v. Commissioner, T.C. Memo. 2001-64 (“Indebtedness is not
considered genuine, that is, a true loan, if the facts show that
the parties to the loan did not intend the principal amount of
the indebtedness to be repaid in full.”).
Certain other factors point to the absence of a genuine
debtor-creditor relationship between Credit Lyonnais and MGM
Group Holdings. First, MGM Group Holdings (or SMHC) never
executed a note for its assumption of the $79 million debt.
There is no indication that the Credit Lyonnais group and MGM
Group Holdings established any fixed repayment schedule for the
$79 million debt. There is no indication that the Credit
174 In the Forms 5472, “Information Return of a 25% Foreign-
Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S.
Trade or Business”, included in its consolidated income tax
returns for the periods ended Dec. 31, 1991, Dec. 31, 1992, Dec.
31, 1993, Dec. 31, 1994, Dec. 31, 1995, and Oct. 8, 1996, MGM
Holdings (and its subsidiaries) reported that no interest was
paid on amounts owed by MGM Holdings and its subsidiaries to
Credit Lyonnais and CLBN. In the Form 5472 for its consolidated
income tax return for the period ended Dec. 31, 1996, MGM Group
Holdings (and its subsidiaries) reported that no interest was
paid on the $1,051,031,234 reported as owed by MGM Group Holdings
and its subsidiaries to Credit Lyonnais and Generale Bank.
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