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U.S. at 591, or a shareholder, Washington Athletic Club v. United
States, 614 F.2d 670, 673-677 (9th Cir. 1980). If the payor is a
shareholder, we specifically look to see whether the payor has an
investment motive in making the payment. See, id. (holding the
investment motive to be the crucial element of capital
contributions). If an investment motive exists, then the payment
is a contribution to capital. See Lake Petersburg Association v.
Commissioner, T.C. Memo. 1974-55 (holding that payments of
assessments to a housing cooperative were capital contributions
and not membership fees for services turned on the conclusion
that an investment motive existed); Minnequa Univ. Club v.
Commissioner, supra (an investment interest in members' payment
of assessments to a social club led to the conclusion that the
payments were contributions to capital). The question in the
case at hand is whether the CBOT members had an investment motive
in paying the transfer fee.
Direct proof of the motive of the payor is rarely
available.13 Whenever state of mind is relevant under the tax
laws, the most important operational question usually concerns
the weight to be attached to external factors. Blum, “Motive,
13 None of petitioner’s members testified about their
motives in paying the transfer fees. However, petitioner’s
Senior Vice President of Planning and Operations, Frank Grede,
testified that petitioner’s management views the transfer fees as
necessary for applicants to understand and recognize that they
are the owners of the association.
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