Estate of Robert G. Kluener, Deceased, Donald E. Hathaway, Co-executor and Charlotte J. Kluener - Page 17

            after the sales, which was effected after he dismissed all other                              
            directors of APECO.                                                                           
                  Respondent relies upon a line of cases holding that, in                                 
            certain circumstances, a transfer of property followed by the                                 
            sale of the property by the transferee will be treated for tax                                
            purposes as a sale by the transferor, with the result that the                                
            gain realized on the sale will be charged to the transferor.                                  
            Stewart v. Commissioner, 714 F.2d 977, 991-992 (9th Cir. 1983),                               
            affg. T.C. Memo. 1982-209; Hallowell v. Commissioner, 56 T.C.                                 
            600, 607-609 (1971); Palmer v. Commissioner, 44 T.C. 92, 94-96                                
            (1965), affd. per curiam 354 F.2d 974 (1st Cir. 1965); Rollins v.                             
            Commissioner, T.C. Memo. 1993-643.  The holdings of these cases                               
            are derived from the reasoning of Commissioner v. Court Holding                               
            Co., 324 U.S. 331, 334 (1945), in which the Supreme Court stated:                             
                  The incidence of taxation depends upon the substance of                                 
                  a transaction.  The tax consequences which arise from                                   
                  gains from a sale of property are not finally to be                                     
                  determined solely by the means employed to transfer                                     
                  legal title.  Rather, the transaction must be viewed as                                 
                  a whole, and each step, from the commencement of                                        
                  negotiations to the consummation of the sale, is                                        
                  relevant.  A sale by one person cannot be transformed                                   
                  for tax purposes into a sale by another by using the                                    
                  latter as a conduit through which to pass title.  To                                    
                  permit the true nature of a transaction to be disguised                                 
                  by mere formalisms, which exist solely to alter tax                                     
                  liabilities, would seriously impair the effective                                       
                  administration of the tax policies of Congress.  [Fn.                                   
                  ref. omitted.]                                                                          
                  Petitioners contend that the foregoing cases do not govern                              
            the instant case, relying principally upon two cases holding that                             
            the form of a transaction involving a transfer of property will                               
            be respected where a legitimate business purpose for the transfer                             

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