- 81 -
itself is not a business purpose which is sufficient to support a
transaction for tax purposes. See Knetsch v. United States, 364
U.S. 361 (1960); Higgins v. Smith, 308 U.S. 473 (1940); Gregory v.
Helvering, 293 U.S. at 469.
3. The Sale-Leaseback Transaction Lacked
Business Purpose and Economic Substance
We also agree with respondent that, even if we did not
disregard Andantech’s participation in the transaction, the sale-
leaseback transaction should not be respected for Federal income
tax purposes.19
Courts will give effect to “a genuine multiple-party
transaction with economic substance that is compelled or encouraged
by business or regulatory realities, that is imbued with tax-
independent considerations, and that is not shaped solely by tax-
avoidance features to which meaningless labels are attached”.
Frank Lyon Co. v. United States, 435 U.S. at 562.
In Horn v. Commissioner, 968 F.2d 1229 (D.C. Cir. 1992), the
Court of Appeals for the D.C. Circuit set forth the following test
for determining whether a transaction should be considered a sham
for tax purposes:
“To treat a transaction as a sham, the court must find
19 We note that, if the transaction has economic
substance, then RD Leasing is entitled to the interest and
depreciation deductions but must include the income from the sale
of the Comdisco rents. If, on the other hand, the transaction
lacks economic substance, then RD Leasing is not entitled to the
claimed deductions and is not required to include the income from
the sale of the rents.
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