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recognized for Federal income tax purposes if it is a sham or is
otherwise devoid of economic substance. See Frank Lyon Co. v.
United States, 435 U.S. 561, 573 (1978); Knetsch v. United
States, 364 U.S. 361, 366 (1960); Bail Bonds by Marvin Nelson,
Inc. v. Commissioner, 820 F.2d 1543 (9th Cir. 1987), affg. T.C.
Memo. 1986-23; Falsetti v. Commissioner, 85 T.C. 332 (1985). The
substance of the transaction, not its form, determines its tax
consequences. Gregory v. Helvering, 293 U.S. 465 (1935). A
transaction must have economic substance which is compelled or
encouraged by business or regulatory realities, is imbued with
tax-independent considerations, and is not shaped solely by tax
avoidance features that have meaningless labels attached. Frank
Lyon Co. v. United States, supra; Hilton v. Commissioner, 74 T.C.
305 (1980), affd. per curiam 671 F.2d 316 (9th Cir. 1982).
There are several key indicators which are helpful in
determining whether a transaction possesses or lacks economic
substance. Among these are (1) the presence or absence of arm’s-
length price negotiations, (2) the relationship between the sales
price and fair market value, (3) the structure of the
transaction’s financing, (4) the degree of adherence to
contractual terms, and (5) whether there was a shifting of the
benefits and burdens of ownership. See, e.g., Helba v.
Commissioner, 87 T.C. 983 (1986), supplemented by T.C. Memo.
1987-529, affd. without published opinion 860 F.2d 1075 (3d Cir.
1988); Zirker v. Commissioner, 87 T.C. 970 (1986); James v.
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