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party. Finally, we cannot discount the fact that petitioners and
their daughter occupied the property at various times between the
time of its sale to the trust and its ultimate sale to a third
party. In the case of the daughter, this period of occupancy
lasted just over 1 year and ended shortly before the property was
sold to the third party in June of 1988. The foregoing takes on
added significance in light of the fact that petitioner was on
"both sides" of the initial sale--both as owner of the property
and as the sole shareholder of Swansons' Tool. Combined with the
questionable business purpose behind a manufacturing
corporation's purchase of a personal residence, we do not find it
unreasonable that respondent would challenge the sale as not
being at arm's-length.
Based on the record as a whole, we cannot say that
respondent's position with respect to the house issue was
unreasonable, as a matter of either law or fact. We recognize
that petitioners have cited a number of cases supporting the
proposition that sales to close corporations by shareholders are
not "sham" transactions per se. We further note that petitioners
cited cases supporting the permissible occupancy of a residence
subsequent to its sale. A careful reading of each, however, does
not persuade us that, based on the facts of this case,
respondent's litigation position was not substantially justified.
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