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prevent respondent and the courts from reallocating income from
Prindle to Mr. and Mrs. Fox. We disagree. In those cases, the
courts found that a sale and leaseback of a building had economic
substance. Frank Lyon Co. v. United States, supra at 577; Sacks
v. Commissioner, supra at 988. In contrast, Prindle had no
economic substance. Thus, Frank Lyon Co. and Sacks do not
control here.
Petitioners contend that Prindle had economic substance
because they intended to use it so that income Mr. Fox earned
from Oxyfresh would pass to their children after petitioners
died, citing Brooke v. United States, 468 F.2d 1155 (9th Cir.
1972). We disagree. Brooke differs from this case. In Brooke,
the taxpayer transferred real estate to his children as a gift.
The Montana State Probate Court appointed the taxpayer as their
guardian. The children rented a pharmacy, apartment, and medical
office to the taxpayer. The taxpayer used the rents to pay for
the children's insurance, health, and education. The U.S. Court
of Appeals for the Ninth Circuit found that the transfers to the
children were not shams and that the children had to pay income
tax on the rents. Id. at 1158.
We are not convinced by petitioners' argument because they
have not shown that Oxyfresh would have made payments after Fox
died. Mr. Fox's testimony on this point was contradictory. He
said that the income stream would continue after he died.
However, he also agreed with Mrs. Fox's testimony that he needed
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