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was in form a sale by LBC of a 48-percent interest in the Atrium
Property to ARICO for $17,100,000 and a lease of the Atrium Land
by UBD from LBC and LAL (following various transfers of interests
in the Atrium Property to LAL). Petitioner argues, however,
that, “as a matter of economic substance, the 1988 Atrium
Transaction was a loan from ARICO to the Bank.” In addition,
petitioner argues that, in cases where a taxpayer challenges the
form of a sale-leaseback transaction, no higher burden of proof
applies, and, therefore, petitioner need only persuade the Court
of the substance of the 1988 Atrium Transaction by the usual
preponderance of the evidence.
In respondent's brief, respondent presents the issue as
follows:
the petitioner has taken the position that the costs of
constructing the Atrium should have been allocated
among the adjoining properties rather than to the
Atrium itself. Accordingly, the notice of deficiency,
as a protective measure, reduced the adjusted basis of
the 48-percent interest in the Atrium sold by LBC to
zero, thereby increasing LBC's gain on the sale by
$13 million. The petitioner now claims that no gain or
loss should have been recognized on the Atrium
sale/leaseback because the transaction was merely a
financing arrangement. * * * it is the respondent's
position that the transaction was a sale/leaseback in
substance as well as form. It is also the respondent's
position, however, that the petitioner is precluded
from disavowing the form of the transaction.
In making the latter argument, respondent relies primarily on
Commissioner v. Danielson, 378 F.2d 771 (3d Cir. 1967), vacating
and remanding 44 T.C. 549 (1965); Estate of Weinert v.
Commissioner, 294 F.2d 750 (5th Cir. 1961), revg. and remanding
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