-249-
Lyonnais group ever intended to enforce the collection of the $79
million debt or interest on that debt.175 Cf. Estate of Flandreau
v. Commissioner, 994 F.2d 91, 93 (2d Cir. 1993) (stating that
there must be a real expectation of repayment and an intent to
enforce collection at the time of the debt transaction), affg.
T.C. Memo. 1992-173.
Credit Lyonnais, CLIS, MGM Group Holdings, and New MGM were
wholly owned entities in the Credit Lyonnais group. Cf. Estate
of Van Anda v. Commissioner, 12 T.C. 1158, 1162 (1949) (stating
that debt transactions involving related parties are subject to
“rigid scrutiny”), affd. 192 F.2d 391 (2d Cir. 1951); see also
Hardman v. United States, 827 F.2d 1409, 1412 (9th Cir. 1987);
Hoyt v. Commissioner, 145 F.2d 634, 636 (2d Cir. 1944), affg. an
unpublished decision of this Court. It is clear that MGM Group
Holdings assumed New MGM’s debt at Credit Lyonnais’s direction as
a convenient way of moving the $79 million debt out of New MGM to
effectuate its sale to Mr. Kerkorian. Although MGM Group
Holdings assumed New MGM’s obligations on the $79 million debt,
this assumption merely created the illusion of a real debt in MGM
Group Holdings. Unlike New MGM, MGM Group Holdings did not have
the assets to back up the $79 million receivable; it already owed
approximately $974 million in receivables to Generale Bank. It
175 There is no indication that Credit Lyonnais or CLIS
charged any interest, or that MGM Group Holdings (or SMHC) paid
any interest, on the $79 million receivable.
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