- 24 -
1366(c)(1)(B). We reached a similar conclusion in Yates v.
Commissioner, T.C. Memo. 2001-280.
3. The Wire Transfer Payments
In the case of the wire transfer payments, the issue is
whether the payments were (1) in substance, as well as in form,
back-to-back loans from Paulan to petitioners and from
petitioners to Sidal or (2) direct loans from Paulan to Sidal,
with petitioners serving as mere conduits for the transfer of
funds. If we find the latter to be the case, we must apply the
so-called step transaction doctrine and ignore, as without
independent legal significance, the same-day wire transfers from
Paulan to each petitioner and from each petitioner to Sidal. See
Aiken Indus. Inc. v. Commissioner, 56 T.C. 925, 934 (1971)
(doctrine applied to disregard an intermediate back-to-back loan
designed to avoid the withholding of U.S. tax on interest
payments to a foreign corporation). If we ignore petitioners’
participation in the transactions, as without legal significance,
then, as in the case of the Paulan direct payments, the issue
will be whether Paulan made funds available for the use of (and
collected repayments of principal and interest from) Sidal as
agent for or on behalf of petitioners.
Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 NextLast modified: May 25, 2011