- 240 -
Judge Goffe further concluded that the test case petitioners
failed to show that the Kersting programs had economic substance
beyond the creation of tax benefits. Relying primarily upon the
manner in which Mr. Kersting actually operated the programs,
Judge Goffe found that there was little if any likelihood of
either corporate profitability or shareholder profitability.
Even assuming some level of corporate profitability and a
related increase in the value of Kersting stock, Judge Goffe
found it significant that no evidence was offered either through
Mr. Kersting or the test case petitioners that Kersting program
participants were ever in a position to sell their stock at an
increased value relative to the purchase price of the stock.
Finally, Judge Goffe found that Mr. Kersting routinely
disregarded standard corporate practices. See id. at 1491-1494,
1991 T.C.M. (RIA), at 91-3034 to 91-3038.
Consistent with his findings that the test case petitioners
had no business purpose for entering into the Kersting programs
other than tax avoidance and that the transactions lacked
economic substance, Judge Goffe held that the stock transactions
were shams.
3. Lack of Genuine Debt/Waltz of Funds
After concluding that the stock transactions were shams,
Judge Goffe went on to consider whether the primary and leverage
loans constituted genuine debt that qualified for deduction under
section 163(a). Judge Goffe independently examined each of the
Kersting programs and loans in dispute.
Page: Previous 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249 NextLast modified: May 25, 2011