-236-
debts, and the debts themselves could be consolidated in the same
hands.” We might agree that such goals could provide legitimate
reasons for using the partnership form. But where, as here, the
banks intended to immediately exit the partnership, petitioner’s
argument loses its force. The interposition of the partnership
contribution was unnecessary to accomplish the Ackerman group’s
acquisition of the SMHC receivables and stock. Indeed, the
Ackerman group easily could have accomplished this acquisition in
one step, in a direct purchase of the SMHC receivables and stock,
with the same effect (apart from tax consequences). In these
circumstances, we cannot agree that Turner Broadcasting or Esmark
precludes the application of the step transaction doctrine. Cf.
W. Coast Mktg. Corp. v. Commissioner, 46 T.C. 32 (1966); Rev.
Rul. 70-140, 1970-1 C.B. 73.
D. Conclusion
We conclude that the step transaction doctrine applies to
Generale Bank’s and CLIS’s contributions of SMHC receivables and
stock to SMP and Somerville S Trust’s purchase of Generale Bank’s
and CLIS’s preferred interests in SMP. We conclude that those
transactions should be recast as direct sales of the SMHC
receivables and stock from Generale Bank and CLIS to Somerville S
Trust followed by Somerville S Trust’s contribution of the
receivables and stock to SMP for its preferred interests.
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