ACM Partnership, Southampton-Hamilton Company, Tax Matters Partner - Page 132

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          364 U.S. 361 (1960), for example, the Court applied the                     
          Gregory v. Helvering case to disallow an interest deduction.  In            
          so doing, the Court stated that "there was nothing of substance             
          to be realized * * * from this transaction beyond a tax                     
          deduction."  Knetsch v. United States, supra at 366.  Similarly,            
          in Frank Lyon Co. v. United States, 435 U.S. 561 (1978), the                
          Court stated that economic substance is a necessary requirement             
          of any transaction.  In Frank Lyon, the Court looked to "the                
          objective economic realities of a transaction rather than to the            
          particular form the parties employed", id. at 573, and stated               
          that the Government should honor the allocation of rights and               
          duties effectuated by the parties "where, as here, there is a               
          genuine multiple-party transaction with economic substance which            
          is compelled or encouraged by business or regulatory realities,             
          is imbued with tax-independent considerations, and is not shaped            
          solely by tax-avoidance features that have meaningless labels               
          attached", id. at 583-584.                                                  
               The Court of Appeals for the Second Circuit applied an                 
          economic substance analysis in Goldstein v. Commissioner,                   
          364 F.2d 734 (2d Cir. 1966), affg. 44 T.C. 284 (1965).  In that             
          case, Mrs. Goldstein won the Irish Sweepstakes.  In an attempt to           
          shelter her winnings from tax, she borrowed from two banks and              
          invested the loan proceeds in Treasury notes.  The loans required           
          her to pay interest at 4 percent, while some Treasury notes                 






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