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respondent makes no mention of this protective deficiency
determination against Zero Gee.
During pretrial discovery, petitioner provided information
to respondent’s representatives regarding the income and expenses
incurred in the business of LPS, and the parties agreed to the
above gross and net income figures of the business conducted in
the name of LPS.
OPINION
Taxpayers have a legal right, by whatever means allowable
under the law, to structure their transactions to minimize their
tax obligations. See Gregory v. Helvering, 293 U.S. 465, 469
(1935). Paper transactions, however, that have no significant
purpose other than to avoid tax and that are not based on
economic reality will not be recognized for Federal income tax
purposes. See Zmuda v. Commissioner, 79 T.C. 714, 719 (1982),
affd. 731 F.2d 1417 (9th Cir. 1984).
Where the form of a transaction has not, in fact, altered
any cognizable economic relationships, the courts may look
through the form and apply the tax law according to the substance
of the transaction. See Markosian v. Commissioner, 73 T.C. 1235,
1241 (1980).
Whether a trust is to be regarded as lacking in economic
substance for income tax purposes represents a question to be
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