- 54 -
Respondent contends, however, that “this is largely beside the
point”. Respondent states on brief: “The question is not
whether the legal issues were bona fide, but whether the
litigation was brought by Petitioner to achieve the stated
purpose.” Respondent contends that ANR, and not the partnership
or Transco, undertook the foreclosure litigation “as a desperate
attempt to delay the adverse tax consequences, not to redeem the
property”. Respondent cites Lutz v. Commissioner, 396 F.2d 412
(9th Cir. 1968), revg. 45 T.C. 615 (1966) for the proposition
that litigation postpones tax consequences of a disposition only
when the taxpayer is the party actually litigating the dispute.
Respondent’s bottom line seems to be that even if the foreclosure
28(...continued)
argument that the possibility of the foreclosure litigation’s
succeeding was too speculative to justify deferring tax
consequences of the foreclosure sale. Cf. Boehm v. Commissioner,
146 F.2d 553 (2d Cir. 1945) (loss for worthless stock was not
deferred pending outcome of shareholders’ derivative action of
unproven value), affd. 326 U.S. 287 (1945); Found. Co. v.
Commissioner, 14 T.C. 1333, 1354 (1950) (loss on construction
contract with a foreign Government was properly deferred until
conclusion of litigation over breach of contract, where the
taxpayer held a “reasonable view” that it could prevail on its
claim). We note, however, that in the foreclosure proceeding,
wherein the partnership contended that the foreclosure should be
conducted in accordance with North Dakota law allowing for a 1-
year redemption period, the District Court characterized the
partnership’s position as having “merit” even though it
ultimately resolved this “close question” against the
partnership. Indeed, in May 1985, DOE Assistant Secretary Mares
had testified before Congress that the partnership would be
entitled under North Dakota law to a 1-year redemption period,
during which it would be entitled to possession of the property
and to its rents and profits. Mr. Mares testified that any
waiver of those rights by the partnership would be void and
unenforceable under North Dakota law.
Page: Previous 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 NextLast modified: May 25, 2011