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deferral was December 10, 1995. Respondent’s determination
resulted in a reduction of petitioner’s capital losses in 1993,
1994, and 1995. Petitioner contends that he purchased the Bowmen
Lane property and used it as his principal residence within the
required timeframe.
We first consider whether petitioner purchased the Bowmen
Lane property. The facts and circumstances of petitioner’s case
reveal that the transaction between him and his wholly owned S
corporation was not a bona fide sale. See Scherr v.
Commissioner, T.C. Memo. 1993-87.
The "incidence of taxation depends upon the substance of a
transaction" rather than its mere form. Commissioner v. Court
Holding Co., 324 U.S. 331, 334 (1945). A transaction lacking
economic substance may be disregarded for tax purposes. See
Knetsch v. United States, 364 U.S. 361, 365-366 (1960); Braddock
Land Co. v. Commissioner, 75 T.C. 324 (1980). In the context of
a sale transaction, the inquiry is whether the parties have in
fact done what they purport to do in the form of their agreement.
See Grodt & McKay Realty, Inc. v. Commissioner, 77 T.C. 1221,
1237 (1981).
The term "sale" is given its ordinary meaning for Federal
income tax purposes and is generally defined as a transfer of
property for money or a promise to pay money. See Commissioner
v. Brown, 380 U.S. 563, 570-571 (1965). The determination of
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