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Petitioner, on behalf of Balmac, applied for and obtained a $1.1
million bank loan based on a number of representations that were
consistent with a sale to Balmac. Further, there was a grant deed
and deed of trust which were filed with the San Diego County
Recorder's office. And finally, there was the escrow check for
$1,960,680.25 that was delivered to petitioner's nominee, WTC under
the Holding Agreement, as seller, and a $5 million installment note
that was secured by the recorded deed of trust.
Petitioners did not attempt to show that the sale transaction
to Balmac was the result of mistake, undue influence, fraud, or
duress. Instead, they ask us to disregard the transaction as
nothing but a ruse to obtain the $1.1 million bank loan and want us
to believe that the transaction was as they reported for tax
purposes. We refuse to do so. "[W]hile a taxpayer is free to
organize his affairs as he chooses, nevertheless, once having done
so, he must accept the tax consequences of his choice, whether
contemplated or not * * * and may not enjoy the benefit of some
other route he might have chosen to follow but did not."
Commissioner v. National Alfalfa Dehydrating & Milling Co., 417
U.S. 134, 149 (1974).
Where a taxpayer seeks to disavow what is purported to be a
sale, the burden lies with the taxpayer to prove error in the
Commissioner's determination that the transaction was in fact a
sale. Shannon v. Commissioner, 29 T.C. 702, 718 (1958). Here,
petitioners failed to prove error in respondent's determination.
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