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assets under section 1221 when resold by the employer. Rev. Rul.
82-204, 1982-2 C.B. 192. Respondent infers that petitioner
structured these relocation transactions to convert capital loss
into deductions against "ordinary" income. To determine whether
petitioner is entitled to deduct the payments to the RSC, we
first address the threshold question of whether petitioner
acquired ownership of the residences. If petitioner were found
to be the owner of the residences, we would then need to
determine whether the residences were capital or ordinary income
assets.
The economic substance of a transaction, rather than its
form, controls in determining whether the transaction constitutes
a sale for Federal tax purposes. Gregory v. Helvering, 293 U.S.
465 (1935); Derr v. Commissioner, 77 T.C. 708 (1981). We
consider the objective economic realities of a transaction to
determine its tax consequences. Frank Lyon Co. v. United States,
435 U.S. 561, 573 (1978); Houchins v. Commissioner, 79 T.C. 570,
589 (1982). Whether petitioner became the owner of the
residences for Federal tax purposes is a question of fact to be
determined from the written agreements and all relevant facts and
circumstances. Reinberg v. Commissioner, 90 T.C. 116, 132
(1988); Grodt & McKay Realty, Inc. v. Commissioner, 77 T.C. 1221,
1237 (1981). Respondent argues that the transactions between the
RSC and relocating employees constitute sales of the employees'
residences to the RSC. Respondent further contends that the RSC
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