Provides a detailed analysis of Technical Advice Memorandum 200418008 of 30 April 2004 and of TAM 200419001 of 7 May 2004, which were both issued by the IRS and deal with the applicability and scope of Sec. 385 of the IRC. In addition, Australian legislation regarding the classification as debt or equity is addressed. The impact of the Australia-USA income tax treaty has also been discussed.