-254-
of the MGM operating company. Once the MGM operating company was
sold, however, any hope of recovering the debts disappeared.
Without its MGM stock and a major cash or asset infusion, it
seems clear that MGM Group Holdings would have no meaningful
prospective value. Looking beyond the formality of MGM Group
Holdings’ assumption of the $79 million debt, Credit Lyonnais’s
intentions here point to the absence of a genuine debtor-creditor
relationship and bona fide indebtedness. See Muserlian v.
Commissioner, supra at 113; A.R. Lantz Co. v. United States, 424
F.2d 1330, 1333-1334 (9th Cir. 1970).
We conclude that MGM Group Holdings’ assumption of New MGM’s
$79 million debt obligation did not establish a valid debtor-
creditor relationship with the Credit Lyonnais group and did not
create a bona fide indebtedness for Federal tax purposes.
Because the $79 million receivable did not represent a bona fide
indebtedness, no basis was established in that receivable, and no
basis carried over to SMP on CLIS’s purported contribution of
that receivable.
VI. Corona Transaction
Respondent argues that Mr. Lerner structured the Corona
transaction for the sole purpose of duplicating the built-in loss
in the $79 million receivable. Respondent contends that there
was no business purpose for the Corona transaction and that Mr.
Lerner structured the transaction for the sole purpose of
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