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It is our view that Kanter’s transfer of his grantor trusts’
real estate partnership interests to Cashmere and the series of
transactions which followed thereafter constituted a tax
avoidance purpose under section 357(b).
The parties agree that the trusts were grantor trusts with
respect to which Kanter was the "deemed owner". The grantor
trust rules generally provide that any taxpayer treated as the
deemed owner of any portion of a trust will include in the
computation of his own taxable income those items of income,
deductions and credits against tax of the trust which are
attributable to the taxpayer's portion of the trust. See secs.
671-679.
Section 1001 provides the general rules regarding the
computation and recognition of gain or loss from the sale or
other disposition of property. Section 1001(c) provides that
"except as otherwise provided in this subtitle, the entire amount
of the gain or loss on the sale or exchange of property * * *
shall be recognized."
Section 351 sets forth a significant exception to the
recognition provisions. It provides that no gain or loss is
recognized when a taxpayer transfers property to a controlled
corporation solely in exchange for the corporation's stock. See
Sec. 351(a). Property, for the purposes of section 351, includes
partnership interests. The purpose for the nonrecognition
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