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Courts often must address taxpayers' "artful devices" to
convert ordinary gain into more favorable capital gain or to
convert capital loss into more favorable ordinary loss. See
Commissioner v. P.G. Lake, Inc., 356 U.S. 260, 265 (1958) (citing
Corn Prods. Ref. Co. v. Commissioner, 350 U.S. 46, 52 (1955)).
That task should be accomplished on the basis not of the
"cancellation" label used by the parties but on the realities of
the transactions and expectations of the parties.
We reiterate what we stated in Stoller v. Commissioner,
supra, when presented with the identical facts as in the instant
cases, that to call the closing transactions in issue
"cancellations" is a misnomer and is misleading.
As stated earlier, we believe that cases involving
unexpected and true cancellations of commercial contracts and
"vanishing" or "disappearing assets" are not particularly
helpful. See Leh v. Commissioner, 260 F.2d 489 (9th Cir. 1958),
affg. 27 T.C. 892 (1957); Commissioner v. Pittston Co., 252 F.2d
344, 347-348 (2d Cir. 1958), revg. 26 T.C. 967 (1956); General
Artists Corp. v. Commissioner, 205 F.2d 360, 361 (2d Cir. 1953),
affg. 17 T.C. 1517 (1952); Commissioner v. Starr Bros., 204 F.2d
673, 674 (2d Cir. 1953), revg. 18 T.C. 149 (1952).
Those cases involve regular commercial contracts for the
provision of goods or services and the unexpected cancellation of
the contracts in midstream due to unusual circumstances not
consistent with the continuation of the original contracts that
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