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Each tax, according to a legislative plan, raises funds
to carry on government. The purpose here is to tax
earnings and profits less expenses and losses. If one or
the other factor in any calculation is unreal, it
distorts the liability of the particular taxpayer to the
detriment or advantage of the entire tax-paying group. *
* *
The sale-leaseback transaction was designed by Comdisco to create
just such a distortion.
It is axiomatic that taxpayers may structure transactions to
take advantage of tax benefits. But “After a certain point, * * *,
the transaction ceases to have any economic substance and becomes
no more than a sale of tax profits.” Hines v. United States 912
F.2d 736, 741 (4th Cir. 1990). Here, the evidence in the record
clearly indicates that the investment scheme devised and
orchestrated by Comdisco “reached the point where the tax tail
began to wag the dog.” Id.
To conclude, the record demonstrates that the sale-leaseback
transaction involved herein was not bona fide and was, from an
economic viewpoint, unreasonable. Under the theories advanced by
respondent, the transaction should not be respected for Federal tax
purposes. Consequently, we hold that (1) Andantech’s claimed
12/10/93 short period should be disregarded, (2) Andantech is not
required to include the income from the sale of the rents and is
not entitled to deduct $2,143,937 as expenses from other rental
activities for the 12/31/93 short period, and (3) Andantech is not
entitled to deduct $50,069,397 of similar expenses for 1994.
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