That’s what ex-Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan says Aventis, Inc. and Subsidiaries, 166 T. C. 1, filed 1/28/26 was trying to do with their financial asset securitization investment trust. Aventis issued some preferred stock, which an offshore sub bought and parked in the FASIT. Aventis also issued a couple notes (hi, Judge Holmes), one to an advisor to Aventis (representing ownership in the FASIT, per Section 860L(b)(2)) and another to a third-party bank. Both the stock and the notes were supposed to represent regular interest.

The advisor “as holder of the ownership interest in the FASIT, reported the income that [Aventis] received on the FASIT assets, and, relying on I.R.C. § 860H(c)(1), deducted amounts representing the expenses of the FASIT and the dividends paid to [offshore sub].” 166 T. C. 1, at p. 1.

Clear? Thought not.

Although this unguided Congressional largesse was repealed long before years at issue, there was a grandfather clause that kept this one alive.

The FASIT converted the stock dividends to interest, hence deductible. The deal was a mismatch between taxation of the offshore (equity, not debt, hence not taxable) and onshore (debt, hence deductible interest).

The deal was refinanced, with the third-party bank taking over the advisor’s role, and the deal finally ended after years at issue.

IRS disregarded the FASIT and handed all the gains back to Aventis, less fees paid to advisor. Aventis petitions.

The case goes off on debt-vs-equity, with an overlay of son-of-FDAP: was the interest readily determinable under FASIT rules? Was a fixed amount payable to the investor at maturity?  If not ab initio, grandfathering doesn’t help. It’s a duel of the experts.

And of course the parties modified the terms, which also knocks out grandfathering. And their substantial compliance argument founders on the express terms of the statutes.

FASITs were meant to spread risk and make business (nonmortgage) borrowing easier. They wound up making gimmicks like this available.