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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