CGF Industries, Inc. and Subsidiaries - Page 31




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               Under the arrangement, Dr. Gordon purchased life interests             
          in tax-exempt bonds, while the family trust simultaneously pur-             
          chased the remainder interests, with the funds provided, in large           
          part, by Dr. Gordon.  The taxpayer then sought to amortize the              
          cost of his income interest ratably over his expected life.  We             
          held that, while, in form, the taxpayer had acquired a depre-               
          ciable income interest, in substance, he purchased full ownership           
          of the bonds and donated the remainder interests to the trust.              
          Id. at 330-331.                                                             
               Invoking the step transaction doctrine to ignore the shift             
          of funds from Dr. Gordon to the family trust, the Court concluded           
          that "Dr. Gordon bought the whole bonds, using the family trust             
          as a mere stopping place for a portion of their purchase prices."           
          Id. at 328.  We reasoned further that, although the trust owned             
          stock holdings which would have provided it with sufficient cash            
          to participate in the joint bond purchases, "the trust made no              
          real purchases, but was merely a way station for the accumulation           
          of cash provided for the most part by * * * [Dr. Gordon]."  Id.             
          Consequently, applying the rationale of Lomas Santa Fe, Inc. v.             
          Commissioner, supra, and United States v. Georgia R.R. & Banking            
          Co., 348 F.2d 278 (5th Cir. 1965), we disallowed Dr. Gordon's               
          amortization deductions of his life interests in the bonds.                 
               Kornfeld v. Commissioner, 137 F.3d 1231 (10th Cir. 1998),              
          was another case involving amortization of a life interest in               
          bonds.  Julian Kornfeld, an experienced tax attorney, believed he           
          could structure a transaction which would give him income,                  

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