-74- 2d 1253, 67-1 USTC par. 9392 (M.D. Fla. 1967)). The Court of Appeals further noted that, because the aggregate price that G.M.C. paid for the used trucks was in excess of their aggregate fair market value, G.M.C. could have yielded a profit from the transactions in question only by viewing the alleged purchases of used trucks and the alleged sales of new trucks as one transaction. Id. According to the Court of Appeals, the transactions in question were sculptured * * * so as to achieve the best possible tax results for Redwing. Instead of obtaining customary discounts from the retail price of the new trucks, Mendez would insist that the manufacturers add the discount amount to the price of the used trucks being repurchased. The gain of the trade-in price over the depreciated basis of the used trucks would be recognized at capital gains rates, and the basis of the new trucks for depreciation purposes would be inflated. As a result, Redwing's depreciation deductions from ordinary income would also be inflated, resulting in considerable tax savings. [Redwing Carriers, Inc. v. Tomlinson, supra at 655-656.] The Court of Appeals for the Fifth Circuit held in the Redwing Carriers, Inc. case that the transfers of used trucks by the taxpayer and the acquisitions of new trucks by its subsidiary were, in substance, like-kind exchanges. In so holding, the Court stated: As is obvious from the above facts, these Mendez- dominated transactions were severable in form only. On substance, the sale was in bondage to the purchase and the purchase indissolubly dependent upon the sale. If Redwing had not carried out the agreement to buy the new trucks, the auto makers would have had no juristic obligation to purchase the used trucks. The buying and selling were synchronous parts meshed into the same transaction and not independent transactions.Page: Previous 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 Next
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