- 15 -
later, Commercial. Petitioners, nonetheless, have attempted to
structure the extinguishment of their debt as capital
contributions. Thus, petitioners believe that the form should be
respected for Federal tax purposes.
Taxpayers may attempt to structure their transactions in
such a way as to lessen their tax burden. Gregory v. Helvering,
293 U.S. 465 (1935). Partners may attempt to structure the
substance of their transactions by choosing the form of the
transactions. Otey v. Commissioner, 70 T.C. 312 (1978), affd.
per curiam 634 F.2d 1046 (6th Cir. 1980). Ordinarily, "taxpayers
are * * * bound by the form of their transaction while the
Government can attack that form if it does not represent the
substance of the transaction." Newhall Unitrust v. Commissioner,
104 T.C. 236, 243 (1995). Petitioners contend that we should
respect the form they have chosen which is reflected in the
Agreement. "Whether a debt has been discharged is dependent on
the substance of the transactions. Mere formalisms arranged by
the parties are not binding in the application of the tax laws."
Cozzi v. Commissioner, 88 T.C. 435, 445 (1987) (citing
Commissioner v. Court Holding Co., 324 U.S. 331 (1945)).
Beginning in the summer of 1987, shortly after acquiring
Empire, Commercial desired to terminate both its investor and
debtor-creditor relationships in the joint ventures. Commercial
requested that the investing partners obtain funding to ensure
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