Today, the Court of Appeals for the Second Circuit issued a decision holding that the Tax Court and District Court for the Southern District of New York properly determined the tax implications of certain cross-border transactions involving BNY Mellon and AIG, respectively.  The BNY Mellon case involved a transaction commonly referred to as a “Structured Trust Advantaged Repackaged Securities” (STARS) transaction, while the AIG case involved a cross-border sale and repurchase transaction.  The court held that the economic substance doctrine applies to the foreign tax credit regime and that foreign taxes paid, but not foreign tax credits claimed, should be considered in calculating pre-tax profit to determine whether a transaction has objective economic substance.  The court also concluded that BNY Mellon was entitled to deduct interest expense paid on a loan entered into in connection with the STARS transaction.