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Respondent does not dispute the form in which petitioners
have cast the loans in question. Instead, respondent argues that
the Chapmans and the Christies have failed to recognize the
income tax consequences flowing from the corporate and plan
loans. Accordingly, we must decide whether petitioners should be
permitted to repudiate the loans from the Plan to the Chapmans
and the Christies and the loans from Milo Chapman and David
Christie to the corporations.
A taxpayer's ability to disavow the form it has chosen for a
transaction is circumscribed. Illinois Power Co. v.
Commissioner, 87 T.C. 1417, 1430 (1986); Bolger v. Commissioner,
59 T.C. 760, 767 n.4 (1973). The Supreme Court has observed
repeatedly that "while a taxpayer is free to organize his affairs
as he chooses, nevertheless, once having done so, he must accept
the tax consequences of his choice, whether contemplated or not *
* * and may not enjoy the benefit of some other route he might
have chosen to follow but did not." Central Tablet Manufacturing
Co. v. United States, 417 U.S. 673, 690 (1974); Commissioner v.
National Alfalfa Dehydrating & Milling Co., 417 U.S. 134, 148-149
(1974). It would be quite intolerable to pyramid the existing
complexities of tax law by a rule that the tax shall be that
resulting from the form of transaction taxpayers have chosen or
from any other form they might have chosen, whichever is less.
Television Indus., Inc. v. Commissioner, 284 F.2d 322, 325 (2d
Cir. 1960), affg. 32 T.C. 1297 (1959).
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