- 63 -
the step-transaction doctrine applies to collapse the transfer of
the Woodbine assets and business from Howard to Alice to Woodbine
Association to Gregg and Julia Kunkowski into a direct transfer
from Howard to the Kunkowskis.
As for the step-transaction doctrine, section 1.1041-1T(a),
A-2, Example (3), Temporary Income Tax Regs., 49 Fed. Reg. 34452
(Aug. 31, 1984), does say that the step-transaction doctrine may
apply to section 1041 in appropriate circumstances. However, the
regulation addresses the use of the step-transaction doctrine to
extend, rather than limit, the sweep of section 1041. A-2 as a
whole says that section 1041 applies to all transfers of property
between spouses, not just those incident to divorce. Example (2)
says that this includes transfers between one spouse and a sole
proprietorship owned by the other spouse. Example (3) says that
section 1041 does not apply to transfers between one spouse and a
corporation wholly owned by the other. Example (3) then goes on
to say that in appropriate circumstances general tax principles,
including the step-transaction doctrine, may apply to
recharacterize the transaction. The regulation appears to
contemplate that such general principles could be used in
appropriate circumstances as a basis for applying section 1041.
To use the step transaction doctrine to limit the scope of
section 1041 in the circumstances of this case would be
unwarranted. Indeed, we have already found that Alice Berger
alone reaped the benefits of the ownership of Woodbine from March
Page: Previous 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 NextLast modified: May 25, 2011