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(the second disposition) before the grantor trusts
received any payments under the first disposition. It
is determined, therefore, that the total contract price
for the first disposition is treated as received by the
grantor trusts at the time of the second disposition.
On brief, respondent asserts the transfers from Kanter’s
grantor trusts to Cashmere do not qualify for nonrecognition
treatment under section 351 on the alternative grounds that (1)
there was no valid business purpose for the transfers from the
grantor trusts to Cashmere and/or the grantor trusts did not
control Cashmere immediately after the transfer (under the step-
transaction doctrine), (2) the principal purpose for the
transfers from the grantor trusts to Cashmere was the avoidance
of Federal income tax under section 357(b), and (3) the
promissory notes that the grantor trusts transferred to Cashmere
did not represent genuine indebtedness, and therefore Cashmere
assumed liabilities in excess of the bases in the partnership
interests it received within the meaning of section 357(c).
Respondent also avers that Waco’s purchase of Cashmere’s stock
did not qualify for installment sale treatment because the
transaction amounted to a disposition “of property to a related
person” within the meaning of section 453(e)(1)(A).
Kanter argues the question whether the Cashmere transaction
qualifies for nonrecognition treatment under section 351 is not
properly before the Court, and, in any event, the grantor trusts
transferred their partnership interests to Cashmere for
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