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invoked “to clearly reflect the income of the financial
institution and to prevent the evasion or avoidance of taxes”.
At the outset, we note that the notice of deficiency makes
no mention of Rev. Rul. 90-44, supra. Thus, while the ruling
states that the District Director may require a determination of
interest expense under a rule that is different from that stated
in the statutes, we find no basis in the record from which to
find (or to conclude) that the District Director has in fact
exercised the authority purportedly given to him by the statutes.
To the contrary, we read the notice of deficiency to indicate
that respondent observed that Peoples had transferred tax-exempt
obligations to Investments so that Peoples afterwards had
interest expenses but little to no tax-exempt interest income and
determined that the transfer was ineffective for Federal income
tax purposes because: (1) Investments was not a legitimate
business entity with independent business operations but was a
sham created solely to avoid taxes, and (2) Investments’ assets
and liabilities are viewed as those of Peoples because Peoples
and Investments reported their operations for financial and
regulatory reporting purposes on a consolidated basis.
All the same, we are not bound by an interpretation in a
revenue ruling. See Rauenhorst v. Commissioner, 119 T.C. 157,
173 (2002); see also Johnson v. Commissioner, 115 T.C. 210, 224
(2000). The Court of Appeals for the Seventh Circuit has held
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