CMI Int'l, Inc. v. Commissioner
United States Tax Court
P's wholly owned domestic subsidiary, D, participated in a debt-equity-swap transaction in which D exchanged an interest in Mexican U.S.-dollar-denominated debt for stock in D's Mexican subsidiary. On its consolidated 1988 tax return, P reported no gain or loss relating to the swap transaction. In the notice of deficiency, respondent determined that P recognized an $ 830,000 gain relating to the transaction.
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P's wholly owned domestic subsidiary, D, participated in a debt-equity-swap transaction in which D exchanged an interest in Mexican U.S.-dollar-denominated debt for stock in D's Mexican subsidiary. On its consolidated 1988 tax return, P reported no gain or loss relating to the swap transaction. In the notice of deficiency, respondent determined that P recognized an $ 830,000 gain relating to the transaction. HELD: Pursuant to sec. 367(a), I.R.C., and sec. 1.367(a)- 1T(b)(3)(i), Temporary Income Tax Regs., 51 Fed. Reg. 17939, P did not recognize any gain.
1Opinion of the Court
Foley, Judge:
By notice dated October 6, 1992, respondent determined a $291,011 deficiency in petitioner’s 1988 Federal income tax. The primary issue for decision is whether petitioner, pursuant to section 367(a), recognized gain relating to a swap transaction. We hold petitioner did not. All section references are to the Internal Revenue Code in effect for the year in issue.
FINDINGS OF FACT
In the 1980’s, the Mexican Government created a “debt-equity-swap” (swap) program that was designed to encourage foreigners to invest in Mexico and reduce the outstanding balance of the Mexican Government’s…
2Cases cited8 opinions
- Jack E. Golsen and Sylvia H. Golsen v. Commissioner of Internal RevenueCourt of Appeals for the Tenth Circuit · 1971
- Commissioner v. DanielsonCourt of Appeals for the Third Circuit · 1967
- Danielson v. CommissionerUnited States Tax Court · 1965
- North American Rayon Corporation, Formerly Known as North American Holding Corporation, Narco v. Commissioner of Internal RevenueCourt of Appeals for the Sixth Circuit · 1994
- Estate of Durkin v. CommissionerUnited States Tax Court · 1992
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