- 57 - 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 transactionPage: Previous 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 Next
Last modified: May 25, 2011