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Respondent, relying on Frank Lyon Co. v. United States, 435
U.S. 561, 583-584 (1978), takes the position that the 1993
restructuring “was not imbued with tax-independent considerations,
but was instead shaped solely by tax-avoidance features that have
meaningless labels attached.” In this regard, respondent posits:
“The 1993 restructuring was conceived and executed for the
principal purpose of permanently escaping corporate level taxes on
the LIFO reserves built into the LIFO inventories of petitioner’s
former consolidated subsidiaries.”
Petitioner disputes respondent’s assertion, maintaining that
the 1993 restructuring occurred in order to achieve tax-independent
economic and/or business desires of both Mr. Coggin and the general
managers. We agree with petitioner. The record reveals: (1)
General managers were vital to the successful operation of the
automobile dealerships; (2) providing incentives to attract and
retain quality general managers was essential in the success of the
automobile dealerships; (3) operating the automobile dealerships in
stand-alone partnership form afforded the general managers
flexibility greater than that offered by operating the dealerships
in corporate form; and (4) Mr. Coggin and the general managers
never discussed recapture of the LIFO reserves.
It is axiomatic that (1) tax considerations may play a
legitimate role in shaping a business transaction, and (2) tax
planning does not necessarily transform an event otherwise
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