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we conclude that the ACLI and ELMS transactions in this case were
not bona fide, and that the primary motive for entering into the
transactions was not for economic profit but rather for tax
purposes. As such, the transactions had no basis in fact or law
and fall within the ambit of being grossly erroneous items.
In reaching this conclusion, we recognize that in Stoller v.
Commissioner, T.C. Memo. 1990-659, affd. in part and revd. in
part 994 F.2d 855 (D.C. Cir. 1993), supplemented 3 F.3d 1576
(D.C. Cir. 1993), the Court recognized certain straddle
transactions wherein some of the same considerations or gremlins
were present. It is important to note, however, that
respondent's expert in that case conceded that the transactions
were bona fide. Mrs. Hemmings has made no such concession.8
Respondent also argues that this case is controlled by Russo
v. Commissioner, 98 T.C. 28 (1992). In Russo, this Court denied
petitioner/wife's motion to amend the petition to raise the
section 6013(e) innocent spouse defense. The deficiency resulted
transactions. To a great extent we agree. But, we have not
based our conclusion on Mr. Aughtry's testimony, rather we focus
on the facts concerning the transactions testified to by Messrs.
Hemmings and Harris. These testimonies are not controverted.
8 Respondent contends that since Mr. and Mrs. Hemmings
were allowed deductions for some of the ACLI and ELMS
transactions in the settlement, the transactions must have had
substance. We do not know the considerations that brought forth
the settlement agreement. But, to a certain extent in complex
and multi-issue cases such as these, there is a certain amount of
"horse trading" that may produce peculiar results. This is
particularly true where the ACLI and ELMS transactions are not
the only issues.
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