Mark J. Steel and Connie J. Steel - Page 11




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          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.]                                 





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