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Holdings' sale of the assets a short time later. Respondent
argues that IRA was seeking only to obtain a large potential loss
deduction for itself. It is pointed out that IRA received 85
percent of Decision Holdings' shares in exchange for $60,000,
whereas the TG limited partnership received $51,000 and 15
percent of Decision Holdings' shares in exchange for the assets.
Respondent also contends that IRA failed to substantiate Decision
Holdings' claimed basis in the assets.
We agree with respondent. We view the two-step transaction
involving Decision Holdings as an economic sham and disregard it
for Federal income tax purposes.
The step transaction doctrine provides that, when separate
steps are integrated parts of a single plan, the separate steps
are disregarded, and the entire plan is viewed as a unit for
purposes of determining the tax consequences. See Helvering v.
Alabama Asphaltic Limestone Co., 315 U.S. 179 (1942); McDonald's
Restaurants, Inc., v. Commissioner, 688 F.2d 520, 524-525 (7th
Cir. 1982), revg. 76 T.C. 972 (1980). In general, a series of
steps will be integrated into a single plan if the steps are
interdependent, which determination is made by reference to
whether the legal relationships created by any one step would
have been fruitless without the completion of the entire series,
or whether the component parts of the transaction were part of a
single transaction intended to reach the ultimate result.
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