- 127 -
a tax motive, even though the people fighting to defend
the tax advantages of the transaction might not or
would not have undertaken it but for the prospect of
such advantages--may indeed have had no other interest
in the transaction.
In the instant cases, the partnerships converted large sums of
cash into relatively illiquid investments (PPNs and CDs) and,
within a few weeks, incurred significant costs converting the
investment to 80 percent cash and 20 percent LIBOR notes. The
partnerships' short-term investment in the PPNs and CDs, which
guaranteed a net economic loss after accounting for transaction
costs, begs the question why the partnerships did not simply
invest 20 percent of its cash in LIBOR notes. The only plausible
explanation is that the partnerships' short-term investment in
the PPNs and CDs set the stage for greater financial returns in
the form of tax losses for Brunswick. We are convinced that no
reasonable business person would have participated in the CINS
transactions, as they were designed and implemented in these
cases, except for a tax motive.
In Goldstein v. Commissioner, supra, one of the taxpayers,
Tillie Goldstein, sought to shelter $140,000 that she won in the
Irish sweepstakes by borrowing $945,000 from 2 banks at 4 percent
interest, and investing the proceeds in $1 million face amount
U.S. Treasury securities maturing in 3 or 4 years, and which paid
interest of either one-half of 1 percent or 1-1/2 percent. She
then prepaid interest in the amount of $81,396, and sought to
Page: Previous 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 NextLast modified: May 25, 2011