Milo G. and Sarah E. Chapman, et al. - Page 28

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                  Respondent disallowed the processing fees on the grounds                               
            that the transactions were shams lacking a business purpose and                              
            economic substance.  Petitioners, however, argue that the                                    
            separate corporate entity status of Northwest should be                                      
            recognized, citing the test in Moline Properties, Inc. v.                                    
            Commissioner, 319 U.S. 436 (1943), and the line of cases resting                             
            thereon.                                                                                     
                  We are not required to find Northwest was a sham in order to                           
            uphold respondent's determinations.  The notice of deficiency                                
            focuses on the sham nature of the transactions rather than the                               
            sham nature of the corporation.                                                              
                  A "sham" transaction is one that lacks economic substance                              
            beyond the creation of tax benefits.  Knetsch v. United States,                              
            364 U.S. 361, 365-366 (1960);  Karr v. Commissioner, 924 F.2d                                
            1018, 1022-1023 (11th Cir. 1991), affg. Smith v. Commissioner, 91                            
            T.C. 733 (1988).  Petitioners bear the burden of proving that the                            
            challenged transactions were not shams.  Rule 142(a); Sheldon v.                             
            Commissioner, 94 T.C. 738, 753 (1990).                                                       
                  Alternatively, petitioners appear to argue that the proper                             
            test for sustaining the deduction of the processing fee is the                               
            test in Grodt & McKay Realty, Inc. v. Commissioner, 77 T.C. 1221,                            
            1237-1238 (1981).  In Grodt, we set forth eight factors by which                             
            to determine whether the benefits and burdens of ownership have                              








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