Sid Paul Ruckriegel - Page 24

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          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.                                      











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