Don Ballantyne and Susanne C. Ballantyne - Page 18

               The only business conducted by BTG was the receipt of property         
          in a claimed section 351 transaction and the transfer of property           
          to the joint venture.  The $1.1 million bank loan supposedly made           
          to the joint venture, lent again to BTG, and then to petitioner, in         
          our opinion, was simply an attempt to create a basis for interest           
          deductions for petitioner.  Further, petitioner's sale of BTG stock         
          to EPIC was, in our opinion, done in order to create an increase in         
          petitioner's basis in the property (from $582,039 to $3.6 million)          
          prior to the sale of developed lots; and the 20-year, $3.6 million          
          note petitioner received in exchange for the stock was an attempt           
          to defer recognition of gain.                                               
               Respondent contends that the purported sale of the Escondido           
          property to BTG and the subsequent sale of the BTG stock to EPIC            
          were a series of sham transactions devoid of economic substance.            
          We have defined that which constitutes a sham in substance as "the          
          expedient of drawing up papers to characterize transactions                 
          contrary to objective economic realities and which have no economic         
          significance beyond expected  tax  benefits."   Falsetti v.                 
          Commissioner, 85 T.C. 332, 347 (1985).                                      
               We find that petitioner's transactions with BTG and the sale           
          of BTG's stock to EPIC had no economic substance and were intended          
          only to accomplish tax-motivated objectives.  They were sham                
          transactions, and we will disregard them.                                   

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