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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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