- 44 -
ment, the application of certain well-established principles36 to
the facts and circumstances surrounding the December 2, 1999
transaction supports the conclusion that that transaction was not
a sale of lot 5 when it occurred. Therefore, according to peti-
tioners, they had substantial authority when they filed their
1999 return for not reporting the December 2, 1999 transaction as
a sale in that return.37
We reject petitioners’ substantial authority argument. The
problem with that argument is that petitioners have failed to
carry their burden of establishing, let alone by strong proof,
the facts and circumstances that they contend surrounded the
36The well-established principles on which petitioners rely
are the principles that we concluded are applicable in determin-
ing whether the December 2, 1999 transaction and the June 14,
2000 transaction constitute sales for tax purposes. Those
principles are: (1) The key in determining whether a transaction
is a sale for tax purposes is whether the benefits and burdens of
ownership have passed, Grodt & McKay Realty, Inc. v. Commis-
sioner, 77 T.C. 1221, 1237 (1981); and (2) a taxpayer may attempt
to disregard the form of a transaction as not reflective of its
substance, but must present strong proof to do so, see Ill. Power
Co. v. Commissioner, 87 T.C. 1417, 1434 (1986).
37On brief, petitioners appear to suggest at times that they
had substantial authority only to support their position with
respect to “that part of the [December 2,] 1999 transaction in
excess of the $200,000.00 first mortgage loan amount.” Thus,
petitioners seem to take inconsistent positions on brief with
respect to the accuracy-related penalty that respondent deter-
mined for 1999. Regardless whether petitioners intend petition-
ers’ substantial authority argument to pertain to the entire
December 2, 1999 transaction or to be limited to “that part of
the 1999 transaction in excess of the $200,000.00 first mortgage
loan amount”, for the reasons set forth below, we reject that
argument.
Page: Previous 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Next
Last modified: November 10, 2007