- 11 - received the lawsuit in exchange for their BFI stock. Petitioners contend that the open transaction doctrine applies, and under that doctrine the sale or exchange requirement was satisfied when they received the lawsuit for their stock. They emphasize that the receipt of proceeds in an open transaction is relevant only in establishing the amount realized. We shall first deal with petitioners’ contention that they received the lawsuit in exchange for their stock. As a general rule, a taxpayer is bound by the form of the transaction that he has chosen. Framatome Connectors USA, Inc. v. Commissioner, 118 T.C. 32, 47 (2002); Estate of Durkin v. Commissioner, 99 T.C. 561, 571-572 (1992).9 A taxpayer is ordinarily free to organize his affairs as he sees fit; however, once having done so, he must accept the tax consequences of his choice, whether contemplated or not, and may not enjoy the benefit of some other route he might have chosen but did not. Commissioner v. Natl. Alfalfa Dehydrating & Milling Co., 417 U.S. 134, 149 (1974). In this 9See also In re Steen, 509 F.2d 1398, 1402 n.4 (9th Cir. 1975): As a general rule, the government may indeed bind a taxpayer to the form in which he has factually cast a transaction. The rule exists because to permit a taxpayer at will to challenge his own forms in favor of what he subsequently asserts to be true “substance” would encourage post-transactional tax-planning and unwarranted litigation on the part of many taxpayers and raise a monumental administrative burden and substantial problems of proof on the part of the government. * * * [Citations omitted.]Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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