- 97 -
Helvering, supra at 469; Rice's Toyota World, Inc. v.
Commissioner, 81 T.C. 184, 196 (1983), affd. in part, revd. in
part and remanded 752 F.2d 89 (4th Cir. 1985). Nonetheless, to
be accorded recognition for tax purposes, a transaction generally
is expected to have "economic substance which is compelled or
encouraged by business or regulatory realities, is imbued with
tax-independent considerations, and is not shaped solely by tax-
avoidance features that have meaningless labels attached." Frank
Lyon Co. v. United States, 435 U.S. 561, 583-584 (1978). This
last principle, which finds its origin in Gregory v. Helvering,
supra, is better known as the economic substance doctrine.
In Gregory v. Helvering, supra, the taxpayer was the sole
shareholder of United Mortgage Corporation (United) which held
1,000 shares of Monitor Securities Corporation (Monitor). The
taxpayer intended to obtain the Monitor shares and sell them for
a profit. However, the taxpayer hoped to structure the transfer
of the shares from United to herself so as to reduce or avoid the
income tax that would arise if the transfer were treated as a
dividend distribution. In this regard, the taxpayer ostensibly
arranged a "reorganization" pursuant to section 112(g) of the
Revenue Act of 1928, ch. 852, 45 Stat. 791, 818. Specifically,
the taxpayer organized a third corporation, Averill Corporation
(Averill), had United transfer its Monitor shares to Averill, and
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