- 30 -
Accordingly, respondent argues that Petroleum is denied
independent producer status, because pursuant to section
613A(d)(2)(A) and section 1.613A-7(r)(2), Income Tax Regs.,
Petroleum is deemed to be selling its propane through a retail
outlet (Texgas) operated by a related person (Products).
We disagree. A taxpayer is generally free to structure its
business transactions as it pleases, though motivated by tax
reduction considerations, provided the transaction is imbued with
a sufficient business purpose. Gregory v. Helvering, 293 U.S.
465 (1935); Casebeer v. Commissioner, 909 F.2d 1360 (9th Cir.
1990), affg. in part, revg. in part and remanding T.C. Memo.
1987-628; Rice's Toyota World, Inc. v. Commissioner, 81 T.C. 184,
196 (1983), affd. on this issue, revd. in part 752 F.2d 89 (4th
Cir. 1985). On brief respondent seems to be arguing that
Petroleum devised the 1982 reorganization to obtain tax benefits
associated with independent producer status. Respondent,
however, does not argue that the reorganization was devoid of
economic substance, nor does respondent challenge the validity of
Petroleum's corporate structure. Rather, respondent asks us to
disregard the provision of the service agreement which
establishes that Petroleum was to retain title to its propane
until Products sold the propane on Petroleum's behalf to
unrelated third parties. We decline to do so.13
13 Respondent does not dispute that Petroleum qualifies as an
independent producer if the terms of the service agreement are
respected. See Rev. Rul. 92-72, 1992-2 C.B. 118.
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