Anthony Teong-Chan Gaw as Transferee of Radcliffe Investment LTD. - Page 12

                                                 - 101 -                                                   

                         The narrowest alternative is the "binding commit-                                 
                  ment" test, under which a series of transactions are                                     
                  collapsed if, at the time the first step is entered                                      
                  into, there was a binding commitment to undertake the                                    
                  later step.  See Commissioner v. Gordon, 391 U.S. 83,                                    
                  96 (1968); * * *                                                                         
                         At the other extreme, the most far-reaching alter-                                
                  native is the "end result" test.  Under this test, the                                   
                  step transaction doctrine will be invoked if it appears                                  
                  that a series of formally separate steps are really                                      
                  prearranged parts of a single transaction intended from                                  
                  the outset to reach the ultimate result.  See King                                       
                  Enters., Inc. v. United States, 418 F.2d at 516; * * *                                   
                         The third test is the "interdependence" test,                                     
                  which focuses on whether "the steps are so interdepen-                                   
                  dent that the legal relations created by one transac-                                    
                  tion would have been fruitless without a completion of                                   
                  the series."  Redding v. Commissioner, 630 F.2d at                                       
                  1177; * * *                                                                              
                  Steps that are transitory, meaningless, or lacking in a non-                             
            tax, business purpose may be disregarded for purposes of deter-                                
            mining the true nature of a transaction.  See Minnesota Tea Co.                                
            v. Helvering, 302 U.S. 609, 613 (1938).                                                        
                  A transaction may be treated as a sham where a taxpayer is                               
            motivated by no business purpose other than obtaining tax bene-                                
            fits and the transaction has no economic substance because no                                  
            reasonable possibility of profit exists.  See Rice's Toyota                                    
            World, Inc. v. Commissioner, 752 F.2d 89, 91-95 (4th Cir. 1985),                               
            affg. on this issue 81 T.C. 184 (1983).  Even if a transaction is                              
            not a sham, it may still be recast in order to reflect its true                                
            nature.  See Packard v. Commissioner, 85 T.C. 397, 419-422                                     
            (1985).                                                                                        
                  Interposition of an intermediary between other persons in-                               
            volved in a transaction may be disregarded under substance over                                



Page:  Previous  91  92  93  94  95  96  97  98  99  100  101  102  103  104  105  106  107  108  109  110  Next

Last modified: May 25, 2011