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fictitious assets for avoiding the taxation of such gains. Such
policy is borne out by the provisions of section 357(b).
We conclude that Cashmere's assumption of the partnership
interests subject to liabilities (the aggregate of the negative
capital accounts) was principally for a tax avoidance purpose.
Consequently, gain equal to the liabilities is recognized by the
trusts, and thus by Kanter as their grantor, under section
357(b). The burden was on Kanter to prove by a clear
preponderance of the evidence that tax avoidance was not his
principal purpose or that he had a valid business purpose. See
sec. 357(b)(2). He has not done so. As we have previously
indicated, we believe the entire series of transactions was
structured by Kanter to avoid taxation on otherwise recognizable
gains. We find that his principal purpose in having Cashmere
acquire the partnership interests subject to the liabilities was
to avoid tax; it served no business purpose, and it thus
generated gain to him equal to the amount of the liabilities to
which the partnership interests were subject at the time of the
exchange; i.e., the amounts of their negative capital accounts.
See sec. 357(b)(1).
Alternatively, section 357(c) provides that, in the case of
a section 351 exchange to which section 357(b) does not apply, if
the total liabilities assumed together with the total liabilities
to which the property transferred is subject to exceed the
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