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Prior to the years in question, Pamela Osowski (Osowski) was
Kanter's secretary. At some time, she also worked for Film
Writers Corp. Administration Co. transferred money to Osowski
during 1984 and 1985 by check and wire transfer. The checks
contained the notation "loan". A document entitled "WIRE
TRANSFER RECORD" also contained the notation "loan", but did not
indicate from what account the alleged wire transfer was made.
Kanter acquired the Osowski note from Administration Co. on March
31, 1987, for $16,625.
Classic Custom Furniture was owned by Meyers' husband.
Administration Co. transferred funds by check and wire transfer
to the account of Classic during 1984 and 1985, and Classic
transferred funds by check to Administration Co. during 1984
through 1987.
OPINION
I. Legal Principles
A. Bona Fides of a Transaction for Tax Purposes
It is a well-settled principle of tax law that labels or
classifications affixed by the parties to a transaction do not
control for tax purposes. If the form of a transaction reflects
its substance, and the sole purpose of the transaction is not tax
avoidance, generally the transaction will be recognized for
Federal tax purposes. See Gregory v. Helvering, 293 U.S. 465
(1935). A transaction that has genuine economic substance and
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