- 96 -
89, 95 (4th Cir. 1985), revg. on a different issue 81 T.C. 184
(1983).
Whether a transaction has economic substance is a factual
determination. United States v. Cumberland Pub. Serv. Co.,
338 U.S. 451, 456 (1950). Key to this determination is that the
transaction must be rationally related to a useful nontax purpose
that is plausible in light of the taxpayer's conduct and useful
in light of the taxpayer's economic situation and intentions.
Both the utility of the stated purpose and the rationality of the
means chosen to effectuate it must be evaluated in accordance
with commercial practices in the relevant industry. Cherin v.
Commissioner, 89 T.C. 986, 993-994 (1987). A rational
relationship between purpose and means ordinarily will not be
found unless there was a reasonable expectation that the nontax
benefits would be at least commensurate with the transaction
costs. See Yosha v. Commissioner, 861 F.2d 494, 498 (7th Cir.
1988), affg. Glass v. Commissioner, 87 T.C. 1087
(1986)(explaining the teaching of Goldstein); cf. Seykota v.
Commissioner, T.C. Memo. 1991-234, amended T.C. Memo. 1991-541.
"[D]eliberately to incur an expense greater than the expected
gain--to pay 4 percent for the chance to make 2 percent--is the
antithesis of profit-motivated behavior; such a transaction lacks
economic substance." Yosha v. Commissioner, supra at 498.
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