- 28 -
The taxpayer too has a right to assert the priority of substance
--at least in a case where his tax reporting and actions show an
honest and consistent respect for the substance of a transaction.
Estate of Weinert v. Commissioner, supra at 755. The taxpayer’s
right to assert the primacy of substance over form is the law of
the Fifth Circuit that is binding precedent in the Eleventh
Circuit, to which this case would be appealable if it were not a
small tax case. See Shepherd v. Commissioner, 283 F.3d 1258,
1262 n.6 (11th Cir. 2002), affg. 115 T.C. 376 (2000).11 We
examine the particular transactions at issue to determine whether
the form used by ATV and Mr. Cutts reflects the substance of what
was accomplished.
United States v. Ingalls, supra, addressed the setoff
question in a pre-section 7872 context. The question in Ingalls
was whether the compromise of an employment contract claim was
legally effective to defer income over the compromise period.
The taxpayer was a shareholder in a family-owned corporation.
The taxpayer had borrowed heavily from the corporation prior to
entering into a long-term employment contract with the
corporation. The shareholders got into a dispute over the
validity of the employment contract and the amount of debt the
11 Because any appeal in this case, if it were permissible,
would lie to the Court of Appeals for the Eleventh Circuit, we
follow the precedent established in that Circuit. See Golsen v.
Commissioner, 54 T.C. 742, 756-757 (1970), affd. 445 F.2d 985
(10th Cir. 1971).
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