Consolidated Manufacturing, Inc., M. P. Long Living Trust, Merl Philip Long, Trustee, Tax Matters Person - Page 74

                                        -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.                          




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