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purposes.
2. Andantech Acted as a Mere Shell or Conduit To Strip
the Income From the Transaction and Avoid Income Taxation
and, Under the Step Transaction Doctrine, Should Be
Disregarded
Even if we believed Andantech should be respected as a valid
partnership (which we do not), it should be disregarded under the
step transaction doctrine. “Under the step-transaction doctrine,
a particular step in a transaction is disregarded for tax purposes
if the taxpayer could have achieved its objective more directly,
but instead included the step for no other purpose than to avoid
U.S. taxes.” Del Commercial Props., Inc. v. Commissioner, 251 F.3d
210, 213-214 (D.C. Cir. 2001), affg. T.C. Memo. 1999-411; see also
Penrod v. Commissioner, 88 T.C. 1415, 1428-1430 (1987). As
described in Smith v. Commissioner, 78 T.C. 350, 389 (1982):
The step transaction doctrine generally applies in
cases where a taxpayer seeks to get from point A to point
D and does so stopping in between at points B and C. The
whole purpose of the unnecessary stops is to achieve tax
consequences differing from those which a direct path
from A to D would have produced. In such a situation,
courts are not bound by the twisted path taken by the
taxpayer, and the intervening stops may be disregarded or
rearranged. [Citation omitted.]
The existence of business purposes and economic effects
relating to the individual steps in a complex series of
transactions does not preclude application of the step transaction
doctrine. True v. United States, 190 F.3d 1165, 1176-1177 (10th
Cir. 1999).
To ratify a step transaction that exalts form over
substance merely because the taxpayer can either (1)
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