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this type of situation; i.e., the sale of an asset between
members of a controlled group and the simultaneous disassociation
of the buyer and the seller.
Petitioners seek to have the above-described transactions
taxed in accordance with the form adopted by them. Petitioners
argue that both substance and form are aligned and that the form
adopted should determine the tax consequences. Petitioners cite
this Court's reasoning in Esmark, Inc. & Affiliated Cos. v.
Commissioner, 90 T.C. 171 (1988), affd. without published opinion
886 F.2d 1318 (7th Cir. 1989), as authority for that proposition.
In Higgins v. Smith, 308 U.S. 473, 477 (1940), the Supreme
Court stated:
the Government may not be required to acquiesce in the
taxpayer's election of that form for doing business
which is most advantageous to him. The Government may
look at actualities and upon determination that the
form employed for doing business or carrying out the
challenged tax event is unreal or a sham may sustain or
disregard the effect of the fiction as best serves the
purposes of the tax statute. * * *
However, in order to apply either the substance-over-form
doctrine or the step-transaction doctrine, we must determine that
the substance of the transaction differs from its form. If
substance follows form then this Court will respect the form
chosen by the taxpayer. Esmark, Inc. & Affiliated Cos. v.
Commissioner, supra.
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