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property must be disregarded as having no tax significance
because, at the end of the day, petitioner ended up where he
started, with title to and beneficial ownership of the Lawrence
Drive property.9
Computational Questions
Petitioners point out that respondent’s deficiency notice,
which made an upward adjustment of $82,569 in long-term gain
realized and recognized by petitioners on the disposition of the
McDonald Street property, which we have found to be the actual
sale, failed to back out the short-term gain of $5,373 that
petitioners reported on the transfer of title to the unimproved
Lawrence Drive property. Petitioners’ point is well taken. It
should be addressed in the Rule 155 computation.
Similarly, other matters not completely resolved, such as
the calculation of additional costs paid by petitioner in
connection with the sale of the McDonald Street property, as well
as his adjusted basis in that property, should be addressed in
the Rule 155 computation of the gain on the sale.
Penalty Question
The subject transactions were structured by petitioner’s
accountant and attorneys after petitioner presented them with the
9 In so doing, the subject transactions satisfy the
requirements for application of what the Court of Appeals for the
Seventh Circuit has characterized as the most restrictive and
rigorous version of the step-transaction doctrine: the binding
commitment test. McDonald’s Restaurants, Inc. v. Commissioner,
688 F.2d 520, 525 (7th Cir. 1982), revg. 76 T.C. 872 (l981).
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