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first, the sham transaction doctrine is simply an aid
to identifying tax-motivated transactions that Congress
did not intend to include within the scope of a given
benefit-granting statute; and second, a transaction
will not be considered a sham if it is undertaken for
profit or for other legitimate nontax business
purposes. * * * As the Seventh Circuit pointed out in
Yosha,[861 F.2d at 498,] “the taxpayer [in Gregory] was
trying to take advantage of a loophole inadvertently
created by the framers of the tax code; in closing such
loopholes the courts could not rightly be accused of
having disregarded congressional intent or
overreached.” * * * [Horn v. Commissioner, 968 F.2d at
1238.]
Relying on section 108(a) and (b) as amended under TRA 1986,
the Court of Appeals stated that "Congress undoubtedly has the
power to grant beneficial tax treatment to economically
meaningless behavior, if indeed that is what happened here."
Horn v. Commissioner, 968 F.2d at 1234. Pointing to the plain
language of section 108, the Court of Appeals held that Congress
had authorized deductions for losses associated with option-
straddle transactions so long as the taxpayer qualified as a
commodities dealer. See Horn v. Commissioner, supra at 1239.
The Court of Appeals stated that "section 108(b) does all that it
need do for the taxpayers to prevail here--it creates an
irrebuttable presumption that a commodities dealer has made his
straddle trades in a trade or business, i.e., he has not engaged
in an economic sham." Id. at 1239. The Court of Appeals further
noted that section 108(a) closely tracked the sham transaction
doctrine insofar as a loss was allowed only if the transaction
was entered into for profit or in a trade or business. See id.
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