-12- prevent respondent and the courts from reallocating income from Prindle to Mr. and Mrs. Fox. We disagree. In those cases, the courts found that a sale and leaseback of a building had economic substance. Frank Lyon Co. v. United States, supra at 577; Sacks v. Commissioner, supra at 988. In contrast, Prindle had no economic substance. Thus, Frank Lyon Co. and Sacks do not control here. Petitioners contend that Prindle had economic substance because they intended to use it so that income Mr. Fox earned from Oxyfresh would pass to their children after petitioners died, citing Brooke v. United States, 468 F.2d 1155 (9th Cir. 1972). We disagree. Brooke differs from this case. In Brooke, the taxpayer transferred real estate to his children as a gift. The Montana State Probate Court appointed the taxpayer as their guardian. The children rented a pharmacy, apartment, and medical office to the taxpayer. The taxpayer used the rents to pay for the children's insurance, health, and education. The U.S. Court of Appeals for the Ninth Circuit found that the transfers to the children were not shams and that the children had to pay income tax on the rents. Id. at 1158. We are not convinced by petitioners' argument because they have not shown that Oxyfresh would have made payments after Fox died. Mr. Fox's testimony on this point was contradictory. He said that the income stream would continue after he died. However, he also agreed with Mrs. Fox's testimony that he neededPage: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
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