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no intention to profit from Salina’s investments under the STAMPS
strategy inasmuch as FPL always intended for those investments to
be immediately liquidated and reinvested under the MAPS strategy.
Respondent further asserts that (1) there is no evidence of
significant negotiations between FPL and ABN prior to FPL’s
investment in Salina, and (2) the $2.25 million in fees paid to
Goldman Sachs and ABN are nothing more than fees for the perceived
tax benefits underlying the transaction.
Petitioner counters by claiming that Salina was formed and
operated as a legitimate investment partnership and that FPL
invested in Salina solely to enhance the returns on its short-term
investments. Petitioner maintains that, although FPL understood
that Salina would realize a substantial capital gain upon the
liquidation of its investments in late 1992, FPL viewed any such
transaction as tax neutral insofar as FPL had a large capital loss
carryover (the CPG loss) to offset any gain.
It is well settled that taxpayers generally are free to
structure their business transactions as they please, even if
motivated by tax avoidance considerations. See Gregory v.
Helvering, 293 U.S. 465, 469 (1935); 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). However, to be
accorded recognition for tax purposes, a transaction generally is
expected to have “economic substance which is compelled or
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