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Laidlaw Case Essay

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LAIDLAW TRANSPORTATION, INC. AND SUBSIDIARIES, Petitioners v. COMMISSIONER
                      OF INTERNAL REVENUE, Respondent

              Tax Ct. Dkt. No. 9361-94. Docket No. 9362-94

                          UNITED STATES TAX COURT

  T.C. Memo 1998-232; 1998 Tax Ct. Memo LEXIS 230; 75 T.C.M. (CCH) 2598

                          June 30, 1998, Filed

DISPOSITION:   [*1]   Decisions will be entered under Rule 155.

COUNSEL: Thomas R. Lamons, C. Glenn McLaughlin, and Brigham J.L. Sanders,
for respondent.

Robert H. Aland, Gregg D. Lemein, Mark A. Oates, Jeffrey M. O'Donnell,
[*2]   John D. McDonald, and Taylor S. Reid, for petitioners.

JUDGES: COLVIN, JUDGE.

OPINIONBY: COLVIN

OPINION: MEMORANDUM FINDINGS OF FACT AND OPINION

COLVIN, JUDGE: Respondent determined deficiencies in and overpayments of
petitioners' Federal income tax as follows:

Laidlaw Transportation, Inc. (LTI) and Subsidiaries
  Year     Deficiency     Overpayment

1984           $ 108,575         $ 8,333
1985           3,178.717               0
1987           7,983,733               0
1988         17,747,370         181,801


Laidlaw Industries, Inc. (LII) and Subsidiaries
      Year         Deficiency     Overpayment

1986                   $ 96,383             -0-
Aug. 1987           19,746,061             -0-
Dec. 1987             6,828,291             -0-

Petitioners received $975,153,806 from a related Dutch corporation, Laidlaw
International Investments B.V. (LIIBV), during the years in issue.
Petitioners transferred $133,515,459 n1 to LIIBV in payments denominated as
interest n2 during those years. The issue for decision is whether the LIIBV
advances to petitioners were debt or equity, and thus whether petitioners
may deduct the $133,515,459 as interest for the years in issue. We hold
that the LIIBV advances to petitioners were equity, and that petitioners
may not deduct the $133,515,459 as interest. n3

n1 The following...

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