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SWIFT, J., respectfully dissenting: With the benefit of the
analyses provided in the opinions of the Second and Ninth Circuit
Courts of Appeals in Salomon, Inc. v. United States, 976 F.2d 837
(2d Cir. 1992), and Walt Disney, Inc. v. Commissioner, 4 F.3d 735
(9th Cir. 1993), we should recognize the error made in our
opinion in Walt Disney, Inc. v. Commissioner, 97 T.C. 221 (1991),
and sustain respondent's position in this case.
The majority suggests that the issue herein turns primarily
on whether a particular provision of the consolidated return
regulations (namely, sec. 1.1502-3(f)(3), Example (5), Income Tax
Regs.) controls over a revenue ruling (namely, Rev. Rul. 82-20,
1982-1 C.B. 6). The majority argues that the above Courts of
Appeals, in the cited opinions, give undue weight to the revenue
ruling and ignore what the majority regards as the clear mandate
of the regulation under section 1502.
The majority is correct in stating that revenue rulings do
not generally constitute legal precedent or "other law". As the
language quoted below, however, from each of the cited opinions
indicates, neither the U.S. Courts of Appeals for the Second nor
the Ninth Circuit rely exclusively on the conclusive effect of
the revenue ruling. Rather, both rely heavily on "economic
reality" and the "substance-over-form" doctrines, which are
simply broader labels for, and which encompass, the step
transaction doctrine.
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