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proposition that, as long as a transaction is bona fide, i.e.,
actually occurred, it cannot be denied economic substance."
Lerman v. Commissioner, supra at 55-56 n.14.
In any case, the transaction disputed in Cottage Sav.
Association v. Commissioner, supra, is fundamentally different
from the transactions disputed in the cases before the Court.
The taxpayer in Cottage Sav. Association v. Commissioner, supra,
sought to minimize its taxes by closing out a real economic loss,
whereas the disputed CINS transactions were designed to generate
fictional losses to offset Brunswick's capital gains. See Compaq
Computer Corp. v. Commissioner, 113 T.C. 17 (1999).
In ACM Partnership v. Commissioner, 157 F.3d 231 (3d Cir.
1998), affg. in part and revg. in part T.C. Memo. 1997-115, the
Court of Appeals for the Third Circuit affirmed this Court’s
holding that a CINS transaction that Merrill Lynch had arranged
for Colgate-Palmolive Company lacked economic substance. We
agree with the Court of Appeals’ reasoning in that case,
distinguishing Cottage Sav. Association v. Commissioner, supra,
in pertinent part as follows:
The distinctions between the exchange at issue in
this case and the exchange before the Court in Cottage
Savings predominate over any superficial similarities
between the two transactions. The taxpayer in Cottage
Savings had an economically substantive investment in
assets which it had acquired a number of years earlier
in the course of its ordinary business operations and
which had declined in actual economic value by over $2
million from approximately $6.9 million to
approximately $4.5 million from the time of acquisition
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