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communication between First Western and the customer; and the
closings of the legs were done by cancellations and assignments
of the contracts. Freytag v. Commissioner, 89 T.C. at 877-882.
We also determined that, even if the transactions were bona fide,
the primary motivation for entering into the transactions was not
for economic profit. Id. at 882-886.
The testimony of Messrs. Hemmings and Harris reveals many of
the same gremlins in the ACLI and ELMS programs. Furthermore,
Mr. Hemmings testified that the sole reason for entering into the
transactions was to defer the bites of income taxes. While Mr.
Harris suggested that there were other economic reasons for
entering into the transactions, he could not explain how, apart
from the purported tax deferral, the programs were economically
viable.
Mrs. Hemmings has the burden of establishing that the
transactions were grossly erroneous. While that burden never
shifts, at this point it seems to us that she has established a
prima facie case that the transactions were not bona fide and
would not be recognized, and the burden of going forward is on
respondent. See Adler v. Commissioner, 85 T.C. 535, 540 (1985).
Respondent introduced no evidence to suggest that either the
gremlins were not present or that the transactions were primarily
driven by economic motives.7 Given the state of these records,
7 On brief, respondent argues that the testimony of David
Aughtry was insufficient to establish the nature of these
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