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Therefore, petitioners are not entitled to increase their bases
in the Four A stock due to Four A's COD income.
II. Increased Section 1231 Loss
In 1996, petitioners filed claims for refund for their
distributive shares of the increased section 1231 loss claimed by
Four A on its 1993 amended Form 1120S. Respondent argues that
(1) the transaction was a lease and not a sale, and (2) if it was
a sale, the amount realized from the sale should be $445,000, the
amount originally reported by Four A on its return, instead of
$145,430 as reported by Four A on its amended return.
A. Sale v. Lease
In 1993, Four A and Black Mountain executed a new agreement
concerning the equipment. The agreement characterized the
transaction as a sale of the equipment.
It is well settled that the economic substance of
transactions, rather than their form, governs for tax purposes.
Grodt & McKay Realty, Inc. v. Commissioner, 77 T.C. 1221, 1236
(1981). In deciding whether a transaction constitutes a sale for
tax purposes, we consider whether the burdens and benefits of
ownership have passed to the purported purchaser. See id. at
1237. This is a question of fact to be ascertained from the
intentions of the parties as evidenced by the written agreements
read in the light of the attending facts and circumstances. Id.
In ascertaining such intent, no single factor, or any special
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