is shown. Smalley v. Commissioner, T.C. Memo. 1973-85; Caruth v.
United States, 688 F. Supp. 1129, 1138-1142 (N.D. Tex. 1987),
affd. on another issue 865 F.2d 644 (5th Cir. 1989).4
As we have noted, "The distinction between the two lines of
cases is often shadowy, particularly in the context of a
purported transfer between a closely held corporation and one or
more of its shareholders." Hallowell v. Commissioner, supra at
607. However, it is for us to decide, upon consideration of all
the circumstances, the factual category in which a particular
transaction belongs. Id. We must resolve the question of who in
substance, and not simply in form, made the sale. Id.
For convenience, we recapitulate the facts, which are
straightforward. Mr. Kluener was the sole shareholder of APECO,
its chief executive officer, and a director. Having decided to
sell his horses, on or about August 1, 1989, Mr. Kluener
transferred title to the horses to APECO, and a separate division
of APECO called APECO Equine was created to handle the horse-
related activities. Most of the horses were sold at auction
between August and December 1989.5 The net proceeds derived from
the sales during 1989 were $2,177,685, and the amount of gain
4 Although petitioners do not rely on United States v.
Cumberland Public Service Co., 338 U.S. 451 (1950), we note that,
in that case, the Supreme Court gave effect to the form of a
transaction involving a transfer and sale of property where the
substance of the transaction accorded with that form.
5 The 41 horses transferred were disposed of as follows:
Thirty-seven were sold at auction during 1989; two were sold for
nominal amounts during 1990; one died; and one was given away
because it was infertile.
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