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simultaneous sale transactions into a transaction dressed as a
redemption, in order to deny a legitimate tax consequence.
In summary, respondent fails to demonstrate a tax fiction, a
misalignment of the parties' rights and the form adopted by them,
a meaningless step, or a nonbusiness purpose to support
invocation of the step transaction or other substance-over-form
doctrine. We hold that the transactions in issue should be taxed
in accordance with the form actually adopted and carried out by
petitioners. Consequently, there was no deemed redemption of MGM
shares, and section 311(a) has no application to this
transaction.
C. Section 267 Issue
Having determined that the proper characterization of the
transaction is the form adopted by petitioners, it is necessary
to determine the applicability of section 267(f) and section
1.267(f)-1T, Temporary Income Tax Regs., 49 Fed. Reg. 46997 (Nov.
30, 1984) (the 1984 temporary regulation). The 1984 temporary
regulation was in force until superseded by the final regulation,
section 1.267(f)-1, Income Tax Regs., July 18, 1995. This final
regulation is prospective only and applies with respect to
transactions occurring in years beginning on or after July 12,
1995. T.D. 8597, 1995-2 C.B. 147, 160.
Respondent now argues and Tracinda agrees, that the
transaction by which MGM sold stock in UA to Tracinda (the UA
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