- 108 -
embodying "legally distinct entitlements". Id. at 566. In
rejecting the Commissioner's determination that the losses should
be disallowed because they lacked economic substance, the Supreme
Court noted that the Commissioner's argument on the point had
consisted of one sentence in a footnote in his brief with a
citation to Higgins v. Smith, supra. See Cottage Sav.
Association v. Commissioner, supra at 567-568. Emphasizing that
the transfers in question were made at arm's length, the Supreme
Court concluded that the Commissioner's citation to Higgins v.
Smith, supra, without further elaboration, was insufficient to
deny the losses under section 165(a). Cottage Sav. Association
v. Commissioner, supra at 568.
We reject petitioner's contention that we are obliged to
respect the tax consequences of the CINS transactions at issue in
these cases under Cottage Sav.. In rejecting the Commissioner's
economic substance argument in Cottage Sav., the Supreme Court
held that the Commissioner had failed to rebut evidence that the
transaction was conducted at arm's length. See Lerman v.
Commissioner, 939 F.2d 44, 55-56 n.14 (3d Cir. 1991), affg. Fox
v. Commissioner, T.C. Memo. 1988-570. The Supreme Court did not
apply the economic substance test as fully articulated in cases
such as Frank Lyon Co. v. United States, 435 U.S. at 583-584, and
Horn v. Commissioner, 968 F.2d at 1237. Accordingly, Cottage
Sav. Association v. Commissioner, supra, "cannot be read for the
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