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Brunswick and ABN, with Merrill Lynch’s assistance, did their
best to conceal and obscure the true nature of the underlying
transactions.
III. Whether Saba and Otrabanda Engaged In Business Activity in
Furtherance of a Nontax Business Purpose
As previously mentioned, the Court of Appeals stated that
its remand would give petitioner a further opportunity to address
the question whether Brunswick entered into the partnerships for
a business purpose other than tax avoidance. The Court of
Appeals directed that the parties should address the validity of
the partnerships in these cases under the rationale of Moline
Properties v. Commissioner, 319 U.S. 436 (1943), as explicated by
the Court of Appeals in ASA Investerings Pship. v. Commissioner,
supra at 512, as follows:
Getting to the controlling issue, petitioner
argues that under the standard established in Moline
Properties v. Commissioner, 319 U.S. 436, 63 S.Ct.
1132, 87 L.Ed. 1499 (1943), the partnership cannot be
regarded as a sham. The Court there said that a
corporation remains a separate taxable entity for tax
purposes “so long as [its] purpose is the equivalent of
business activity or is followed by the carrying on of
business by the corporation.” 319 U.S. at 439, 63
S.Ct. 1132. The Tax Court has since applied Moline to
partnership cases. See Bertoli v. Commissioner, 103
T.C. 501, 511-12, 1994 WL 579942 (1994).
Petitioner views Moline as establishing a two-part
test, under which a tax entity is accepted as real if
either: (1) its purpose is “the equivalent of business
activity” (not tax avoidance), or (2) it conducts
business activities. Moline, 319 U.S. at 439, 63 S.Ct.
1132. Because ASA “engaged in more than sufficient
business activity to be respected as a genuine entity,”
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