- 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