- 36 -
consider legislative purpose in construing tax (and other)
statutes. See 2A Singer, Sutherland Statutory Construction, sec.
48:3, at 549 (7th ed. 2007). While the precise language of both
sections 731(a) and 752 suggests that there is little uncertainty
in their application, we cannot lose sight of the fact that both
sections are part of a large and complex system of rules for
taxing partners and partnerships; viz, subchapter K. The purpose
of subchapter K, as set forth in the income tax regulations, is
“to permit taxpayers to conduct joint business (including
investment) activities through a flexible economic arrangement
without incurring an entity-level tax.” Sec. 1.701-2(a), Income
Tax Regs. Undoubtedly, sections 731(a) and 752 must be construed
in the light of the purpose of subchapter K. In the analogous
situation of determining whether a transaction fits within the
corporate reorganization provisions of the income tax, the
Supreme Court, in Gregory v. Helvering, 293 U.S. 465, 469 (1935),
famously said:
The legal right of a taxpayer to decrease the amount of
what otherwise would be his taxes, or altogether avoid
them, by means which the law permits, cannot be
doubted. * * * But the question for determination is
whether what was done, apart from the tax motive, was
the thing which the statute intended. * * *
Participating partner has failed to convince us that, in
considering the application of sections 731(a) and 752 to the
facts before us, an inquiry is not warranted into whether
Countryside, Mr. Winn, and/or Mr. Curtis engaged in any
“purposive activity” other than tax avoidance. Indeed, we have
held that there are circumstances in which the lack of “purposive
Page: Previous 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Next
Last modified: March 27, 2008