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lacked economic substance. Respondent argues that the
arrangement was a sham.
The starting point for determining whether the form of a
particular transaction will be recognized for tax purposes is the
Supreme Court's decision in Gregory v. Helvering, 293 U.S. 465,
469 (1935), wherein the Court stated:
The legal right of a taxpayer to decrease the amount of
what otherwise would be his taxes, or altogether avoid
them, by means which the law permits, cannot be
doubted. * * * But the question for determination is
whether what was done, apart from the tax motive, was
the thing which the statute intended.
In Gregory, the Court denied reorganization treatment with
respect to a stock distribution even though the taxpayers had
followed each step required by the Code for a reorganization. In
deciding that the distribution was taxable as a dividend, the
Court held that the structure of the transaction was a "mere
device" for the "consummation of a preconceived plan" and not a
reorganization within the intent of the Code as it then existed.
Id. Because the transaction lacked economic substance, as
opposed to formal reality, it was not "the thing which the
statute intended." Id.; see Kirchman v. Commissioner, 862 F.2d
1486, 1490-1491 (11th Cir. 1989), affg. Glass v. Commissioner, 87
T.C. 1087 (1986).
A transaction that lacks substance is not recognized for
Federal tax purposes. See ACM Partnership v. Commissioner, 157
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