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substance.” In Estate of Weinert, the Court of Appeals for the
Fifth Circuit (the Fifth Circuit) stated:
Resort to substance is not a right reserved for
the Commissioner's exclusive benefit, to use or not to
use--depending on the amount of the tax to be realized.
The taxpayer too has a right to assert the priority of
substance--at least in a case where his tax reporting
and actions show an honest and consistent respect for
the substance of a transaction. * * * [Id. at 755.]
Respondent principally cites Illinois Power Co. v. Commissioner,
87 T.C. 1417 (1986), as demonstrating the circumstances in which
this Court shall apply what respondent calls the “Weinert rule”
(respondent's Weinert rule). Petitioner argues that respondent's
Weinert rule is a “misrepresentation of the holding in Weinert.”
We believe that respondent's Weinert rule is an offshoot of
the Fifth Circuit's statement in Estate of Weinert. The Fifth
Circuit did not state that a taxpayer can argue the priority of
substance only if his tax reporting and other actions show an
honest and consistent respect for the substance of a transaction,
but rather, that a taxpayer can argue substance over form at
least when those conditions are met. In other words, the Fifth
Circuit statement does not make honest and consistent respect for
the substance of a transaction in tax reporting and other actions
the sine qua non of a taxpayer's right to disavow the form of a
transaction.
We note, however, that this Court in Illinois Power Co. v.
Commissioner, supra, applied respondent's Weinert rule and did
not allow a taxpayer to disavow the form of a gift transaction
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