- 91 -
yielded one-half percent and others yielded 1-1/2 percent. Her
financial advisers estimated that these transactions would
produce a pretax loss of $18,500 but a substantial after-tax
gain. This Court sustained the Commissioner's disallowance of
the interest deductions. In affirming the decision of this
Court, the Second Circuit stressed that this Court had found that
Mrs. Goldstein's purpose in entering into the loan transactions
"'was not to derive economic gain or to improve here [sic]
beneficial interest; but was solely an attempt to obtain an
interest deduction as an offset to her sweepstakes winnings.'"
Id. at 738 (quoting Goldstein v. Commissioner, 44 T.C. at 295).
The Second Circuit stated further that the loan arrangements did
not "have purpose, substance, or utility apart from their
anticipated tax consequences", and that the transactions had no
"realistic expectation of economic profit". Id. at 740.
The Goldstein case marks an important step in the
development of the economic substance doctrine.20 Unlike many
purported tax shelters, the tax-motivated transactions in that
case were not fictitious. Goldstein v. Commissioner, supra at
737-738. They were real and conducted at arm's length.21 Mrs.
20 In United States v. Wexler, 31 F.3d 117, 123 (3d Cir.
1994), the Court of Appeals for the Third Circuit described
Goldstein as "[t]he seminal sham transaction case".
21 We believe the CINS transaction also was real and not
(continued...)
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