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With regard more specifically to the question of the
relationship between the step transaction doctrine and the
business purpose aspect of a transaction and in the context of
analyzing a section 332 liquidation, the Court of Appeals for the
Tenth Circuit in Associated Wholesale Grocers, Inc. v. United
States, 927 F.2d 1517 (10th Cir. 1991), rejected the contention
that a valid business purpose precludes application of the step
transaction doctrine. The Court of Appeals explained as follows:
Most cases applying the step transaction doctrine, far
from identifying business purpose as an element whose
absence is prerequisite to that application, do not
even include discussion of business purpose as a
related issue. In some cases, the existence of a
business purpose is considered one factor in
determining whether form and substance coincide. In
others, the lack of business purpose is accepted as
reason to apply the step transaction doctrine. We have
found no case holding that the existence of a business
purpose precludes the application of the step
transaction doctrine. [Associated Wholesale Grocers,
Inc. v. United States, 927 F.2d at 1526-1527; fn. refs.
omitted.]
The Court of Appeals for the Tenth Circuit in Associated
Wholesale Grocers., Inc. v. United States, supra at 1527 n.15,
also cited our opinion in Vest v. Commissioner, 57 T.C. 128
(1971), revd. in part and affd. in part on other grounds 481 F.2d
238 (5th Cir. 1973), and commented thereon as follows:
After identifying a business purpose, the * * * [Tax
Court in Vest v. Commissioner] undertakes a thorough
discussion of whether to treat a stock exchange as a
step transaction. 57 T.C. at 145. The * * * [Tax
Court] remarked “[t]he fact that there were business
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