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treatment of the December 2, 1999 transaction by, for example,
consulting a tax professional. Petitioners suggest that they
made no effort to do so because Mr. O’Malley’s education and
business background gave him “the necessary knowledge to under-
stand that the borrowing of money is not a taxable event”.38
According to petitioners, even if they had consulted a tax pro-
fessional with respect to the December 2, 1999 transaction, the
professional would have advised them, “after thorough research
* * * that substance trumps form and in substance Petitioners
engaged merely in financing transactions.”
The problem with petitioners’ argument under section 6664(c)
is the same as the problem with petitioners’ substantial author-
ity argument under section 6662(d). That is to say, petitioners
have failed to carry their burden of establishing, let alone by
strong proof, the facts and circumstances that they contend
surrounded the December 2, 1999 transaction. We have found on
the record presented that petitioners have failed to carry their
burden of establishing, let alone by strong proof, the facts and
38In this connection, Mr. O’Malley testified:
It never occurred to me to even have a discussion with
him [petitioners’ 1999 and 2000 tax return preparer]
about them [the December 2, 1999 transaction and the
June 14, 2000 transaction] being sales because it was
the furthest thing from my mind that not only would I
be paying all the interest on the loan, but to also
have to pay a tax on the transaction it never struck me
as remotely possible or required.
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Last modified: November 10, 2007