River City Ranches #1 Ltd., Jeffry Bergamyer, Tax Matters Partner - Page 28

                                       - 28 -                                         
          devoid of economic substance, it is not recognized for Federal              
          taxation purposes.  Gregory v. Helvering, 293 U.S. 465 (1935).              
               Determining the economic substance of a transaction requires           
          an analysis of several objective factors:  (1) Whether the stated           
          price for the property was within reasonable range of its value;            
          (2) whether there was any intent that the purchase price would be           
          paid; (3) the extent of the taxpayer’s control over the property;           
          (4) whether the taxpayer would receive any benefit from the                 
          disposition of the property; (5) whether the benefits and burdens           
          of ownership passed; (6) the presence or absence of arm’s-length            
          negotiations; (7) the structure of the financing; (8) the degree            
          of adherence to contractual terms; and (9) the reasonableness of            
          the income and residual value projections.  Levy v. Commissioner,           
          91 T.C. 838, 854 (1988); Rose v. Commissioner, 88 T.C. 386, 410             
          (1987), affd. 868 F.2d 851 (6th Cir. 1989).                                 
               Our findings reflect the consideration of these objective              
          factors.  The partnerships had no business purpose beyond                   
          generating tax benefits.  The facts show that the partnerships              
          themselves were shams and lacked economic substance.  They were             
          merely a facade used by Hoyt to provide the tax benefits he                 
          promised in his promotional materials.  They had no independent             
          economic substance beyond the purported sheep breeding                      
          transactions which were also illusory and had no economic effect.           

Page:  Previous  21  22  23  24  25  26  27  28  29  30  31  32  33  34  35  Next 

Last modified: November 10, 2007