- 107 - Petitioner's reliance on Cottage Sav. Association v. Commissioner, 499 U.S. 554 (1991), likewise is misplaced. Petitioner contends that the disputed CINS transactions must be respected for tax purposes inasmuch as they were structured and carried out in strict compliance with the requirements of sections 1001 and 453. In Cottage Sav. Association v. Commissioner, supra, the taxpayer, a savings and loan association, owned participation interests in mortgages that had declined in value due to a surge in interest rates during the late 1970s. After holding the participation interests for a number of years, the taxpayer sold them to several savings and loan associations and purchased from them participation interests in mortgages of approximately equal fair market value. The taxpayer claimed a $2.4 million loss deduction equal to the excess of its bases in the participation interests that it sold over the fair market value of the participation interests that it purchased. The Commissioner disallowed the claimed loss on alternative grounds: (1) The taxpayer had not realized the losses within the meaning of regulations promulgated under section 1001; and (2) the transactions lacked economic substance. However, the Supreme Court sustained the taxpayer's loss deduction, holding that the taxpayer had realized a loss pursuant to section 1001 because the participation interests exchanged were "materially different"Page: Previous 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 Next
Last modified: May 25, 2011