- 31 - 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,Page: Previous 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Next
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