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administration of the tax policies of Congress." Commissioner v.
Court Holding Co., 324 U.S. 331, 334 (1945).
The Court of Appeals for the Third Circuit, to which all
these cases are appealable, has recently applied the principle
that the substance of a transaction, and not its form, governs
its tax consequences. As that court explained,
The general rule on sham transactions in this circuit
is well-established: "If a transaction is devoid of
economic substance . . . it simply is not recognized
for federal taxation purposes, for better or for worse.
This denial of recognition means that a sham
transaction, devoid of economic substance, cannot be
the basis for a deductible loss." [United States v.
Wexler, 31 F.3d 117, 122 (3d Cir. 1994) (quoting Lerman
v. Commissioner, 939 F.2d 44, 45 (3d Cir. 1991), affg.
Fox v. Commissioner, T.C. Memo. 1988-570).]
See, in this regard, Foxman v. Commissioner, 352 F.2d 466,
469 (3d Cir. 1965), affg. 41 T.C. 535 (1964); see also Weller v.
Commissioner, 270 F.2d 294, 296 (3d Cir. 1959)(quoting Gregory v.
Helvering, 293 U.S. 465, 469 (1935)), affg. 31 T.C. 33 and Emmons
v. Commissioner, 31 T.C. 26 (1958), in which the Court of Appeals
for the Third Circuit noted that the Supreme Court had refused to
give effect to "`an elaborate and devious form of conveyance
masquerading'" as a legitimate transaction. The activities there
described were found to be "`a mere device which put on the form
* * * as a disguise for concealing its real character'".
Petitioners bear the burden of proving that the challenged
transactions were not sham transactions, devoid of economic
substance. Rule 142(a); Sheldon v. Commissioner, 94 T.C. 738,
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