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The Court of Appeals for the Second Circuit in Salomon, Inc.
v. United States, supra at 842-843, explained as follows:
In substance, if not in form, the direct and the circuitous
transaction are the same. See Commissioner v. Court Holding
Co., 324 U.S. 331, 334, 65 S.Ct. 707, 708, 89 L.Ed. 981
(1945). Each achieves a rapid transfer of section 38
property outside the group. To distinguish between them
would deny economic reality. See Gregory v. Helvering, 293
U.S. 465, 470, 55 S.Ct. 266, 268, 79 L.Ed. 596 (1935)
(refusing to "exalt artifice above reality" in determining
tax liability). Moreover, such a holding would allow the
common parent of a consolidated group, such as * * * [the
parent], to move section 38 property outside the group
without paying recapture taxes simply by first transferring
the property to a member subsidiary and then distributing
the subsidiary's stock to the third-party. * * *
* * * * * * *
The rapidity with which these components follow one another
suggest that they are, in substance, parts of one overall
transaction intended to dispose of the section 38 assets
outside of the consolidated group. * * * These factual
circumstances, timing and intent * * *. * * * lead to the
conclusion that the two components are steps in a larger
transaction which, when viewed as a whole, constitutes a
section 47(a)(1) "disposition." * * *
* * * * * * *
Under these circumstances, the transaction is, in substance,
a means of moving the assets outside the group. * * *
The Court of Appeals for the Ninth Circuit in Walt Disney,
Inc. v. Commissioner, supra at 741, relied heavily upon the
analysis of the Court of Appeals for the Second Circuit, quoted
from the above language, and stated the following --
"in substance, if not in form, the direct and the
circuitous transaction are the same" and "to
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