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negotiations to the consummation of the sale, is
relevant. A sale by one person cannot be transformed
for tax purposes into a sale by another by using the
latter as a conduit through which to pass title. To
permit the true nature of a transaction to be disguised
by mere formalisms, which exist solely to alter tax
liabilities, would seriously impair the effective
administration of the tax policies of Congress. [Id.;
fn. ref. omitted.]
See also Robino, Inc. Pension Trust v. Commissioner, 894 F.2d 342
(9th Cir. 1990) (holding that pension trust beneficiaries’ sale
of real estate to their pension trusts, which immediately resold
the property, was in substance a sale by the beneficiaries),
affg. T.C. Memo. 1987-468.
Like the corporation in Court Holding Co., Clend functioned
as a conduit in the sale of HouTex. It did not participate in
the negotiations with MMI or in the valuation of the HouTex stock
it ostensibly owned. After the acquisition of HouTex by MMI,
Clend functioned primarily as the repository of the sale
proceeds, most of which were used to make loans to the Melniks or
to purchase real estate at the Melniks’ request.
The lack of evidence regarding Clend’s business purpose,
coupled with its apparent role as a conduit and its usefulness in
obfuscating the pertinent legal analysis, leads us to conclude
that respondent properly disregarded Clend in determining that
petitioners should be taxed on the gain from the sale of HouTex’s
stock.
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