- 95 -
We therefore reject respondent’s assertion of substance over
form. We shall instead apply to respondent the nondisavowal
principle of Commissioner v. Natl. Alfalfa Dehydrating & Milling
Co., supra at 149, that a party who has chosen to organize his
affairs in a certain fashion “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.” We believe the settlement of the Thompsons’ 1979-
1981 deficiencies must be applied by giving effect to their
receipt of the entire amount of the refunds, rather than by
disregarding such receipt as a mere formality in the process of
what was, in substance, respondent’s manipulation of the tax
administrative process to use the Thompsons as a conduit to pay
DeCastro’s fees.
We are not content to rest our conclusion solely by invoking
the nondisavowal principle to hold respondent to the form of the
transaction. To do so might give rise to the implication that we
have disregarded the substance of the transaction. If we did no
more than disregard the substance of the Thompson settlement by
upholding its form, respondent might well impeach our conclusion
by arguing that we thereby would have disregarded the mandate of
the Court of Appeals for the Ninth Circuit to put all petitioners
“in the same position as provided in the Thompson settlement”.
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