- 17 -
them to Pilkington Holdings. Under these circumstances, we think
that the analysis of the Courts of Appeals for the Second Circuit
in Salomon, Inc. v. United States, 976 F.2d 837 (1992), and the
Ninth Circuit in Walt Disney Inc. v. Commissioner, supra, based
on "economic reality" and "substance", which are key elements of
the step transaction doctrine, misses the mark in terms of the
proper disposition of this case. See Ginsburg & Levin, Mergers,
Acquisitions and Buyouts, sec. 1002.1.1.4 (July 1996).
In sum, we hold for petitioner on the issue of the recapture
of the investment tax credit. Such being the case, there is no
addition to tax under section 6661. We again point out that this
opinion resolves only the investment tax credit recapture issue
and that an additional issue relating to the allocation of
deductions is still before the Court. See supra note 2.
Reviewed by the Court.
COHEN, CHABOT, GERBER, PARR, WHALEN, COLVIN, CHIECHI, LARO,
FOLEY, and GALE, JJ., agree with this majority opinion.
HALPERN, J., did not participate in the consideration of
this opinion.
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