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encouraged by business or regulatory realities, is imbued with tax-
independent considerations, and is not shaped solely by tax-
avoidance features that have meaningless labels attached”. Frank
Lyon Co. v. United States, 435 U.S. 561, 583-584 (1978); see Winn-
Dixie Stores, Inc. v. Commissioner, 113 T.C. 254, 278 (1999). This
principle, which finds its origin in Gregory v. Helvering, supra,
is better known as the “economic substance doctrine”.
“A sham transaction is one which, though it may be proper in
form, lacks economic substance beyond the creation of tax
benefits.” Karr v. Commissioner, 924 F.2d 1018, 1022-1023 (11th
Cir. 1991), affg. Smith v. Commissioner, 93 T.C. 378 (1989). An
evaluation whether a transaction is a substantive sham generally
requires: (1) A subjective inquiry whether the transaction was
carried out for a valid business purpose independent of tax
benefits, and (2) a review of the objective economic effect of the
transaction. See Karr v. Commissioner, supra at 1023; Kirchman v.
Commissioner, 862 F.2d 1486, 1490-1491 (11th Cir. 1989), affg.
Glass v. Commissioner, 87 T.C. 1087 (1986); see also ACM
Partnership v. Commissioner, 157 F.3d 231, 247-248 (3d Cir. 1998),
affg. in part and revg. in part on another ground T.C. Memo. 1997-
115; Casebeer v. Commissioner, 909 F.2d 1360, 1363 (9th Cir. 1990),
affg. in part, revg. and remanding in part on another ground Larsen
v. Commissioner, 89 T.C. 1229 (1987), affg. T.C. Memo. 1987-628,
affg. Sturm v. Commissioner, T.C. Memo. 1987-625, and affg. Moore
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