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fees).52 We instead think it appropriate to hold respondent to
the form of the transaction adopted by his misbehaving attorneys,
i.e., the reduction of the Thompsons’ 1979-1981 deficiencies by
62.17 percent, without regard to the fact that the Thompsons used
the bulk of the refunds generated thereby to pay DeCastro’s fees.
We recognize that, in the usual case, it is taxpayers who
are held to the form of the transaction they have adopted; once a
party has chosen to organize his affairs in a certain fashion,
“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 to follow but did not.”
Commissioner v. Natl. Alfalfa Dehydrating & Milling Co., 417 U.S.
134, 149 (1974). On the other hand, respondent generally may
disregard the taxpayer’s form, and, if that form is “unreal or a
sham may sustain or disregard the effect of the fiction as best
serves the purposes of the tax statute.” Higgins v. Smith, 308
U.S. 473, 477 (1940). We also recognize that, in these cases,
the traditional roles of petitioner and respondent have been
reversed. Requiring respondent to assume the procedural posture
of a taxpayer does not necessarily prohibit respondent from
asserting substance over form. We have in mind the following
52The attorney’s fees incurred by petitioners for which
respondent may be liable relate to further proceedings required
by the misconduct of respondent’s attorneys and are in no way
analogous to the Thompsons’ fees to DeCastro for his
representation in the original trial in Dixon II.
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