Milo G. and Sarah E. Chapman, et al. - Page 30

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            to be used as a "rigid two-step analysis."  Id. at 1363.                                     
            Instead, business purpose and economic substance are simply more                             
            precise factors to be considered in the application of the                                   
            traditional sham analysis; that is, whether the transaction had                              
            any practical economic effects other than the creation of income                             
            tax losses.  Sochin v. Commissioner, 843 F.2d 351, 354 (9th Cir.                             
                  The business purpose factor often involves an examination of                           
            the subjective factors which motivated a taxpayer to enter into                              
            the transaction at issue.  Bail Bonds By Marvin Nelson, Inc. v.                              
            Commissioner, supra at 1549.  The economic-substance factor                                  
            involves a broader examination of whether the substance of a                                 
            transaction reflects its form, and whether from an objective                                 
            standpoint the transaction was likely to produce economic                                    
            benefits aside from a tax deduction.  Id.                                                    
                  Dura-Craft and Northwest, both of which acted under the                                
            effective control or direction of Milo Chapman and David                                     
            Christie, were related parties.  In determining whether the form                             
            of a transaction between related parties has substance, we                                   
            compare their actions with what would have occurred if the                                   
            transaction had occurred between parties who were dealing at                                 
            arm's length.  Maxwell v. Commissioner, 95 T.C. 107, 117 (1990).                             
            The question of whether an expense is lacking in economic                                    
            substance is essentially a factual determination.  Commissioner                              

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