persuasiveness, as well as its type. Sec. 1.6662-4(d)(3)(ii),
Income Tax Regs. A case having some facts in common with the tax
treatment of the item in issue is not particularly relevant if it
is materially distinguishable on its facts or is otherwise
inapplicable. Id.
In the instant case, petitioners contend that substantial
authority exists for treating APECO, rather than Mr. Kluener, as
the seller of the horses. Petitioners contend that the
transaction involving the horses complied with the express
provisions of the relevant Code sections and that there was a
business purpose for the transfer of the horses. Literal
compliance with the provisions of the Code, however, is not alone
sufficient to sustain the form in which a transaction is cast
where the form lacks a nontax, business purpose and simply
disguises the true nature of the transaction. Commissioner v.
Court Holding Co., supra at 334; Gregory v. Helvering, 293 U.S.
465, 469 (1935). We have found above that petitioners have not
shown that there was a nontax, business purpose for the
transaction in issue. The authorities relied on by petitioners,
Smalley v. Commissioner, T.C. Memo. 1973-85, and Caruth v. United
States, 688 F. Supp. 1129 (N.D. Tex. 1987), are substantially
distinguishable on their facts.
Accordingly, we conclude that petitioners have failed to
show that there was substantial authority for the items giving
rise to the understatement in issue and that the understatement
is substantial. Consequently, we sustain respondent's
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