- 38 -
of CLPP and MP, the CB&T loans, and the purchase of the AIG
notes, all in furtherance of that plan. Because participating
partner also concedes that the L.L.C.s may be disregarded for
purposes of the motion, the question before us is whether the
CB&T loans and the deemed purchase and distribution of the AIG
notes by Countryside also must be disregarded for lack of
economic substance with the result that the liquidating
distribution must be treated as equivalent to a cash distribution
to Mr. Winn and Mr. Curtis (despite its literal qualification for
nonrecognition of gain under section 731(a)(1)).
b. The Caselaw
In section III.B.2., supra we set forth the seminal language
from Gregory v. Helvering, supra at 469, requiring an inquiry
into what is now generally is referred to as “economic substance”
in order to determine whether to give effect to the
reorganization provisions of the income tax. We shall make a
like inquiry into the economic substance of the liquidating
distribution in order to determine whether to give effect to the
provisions of subchapter K here in issue; viz, sections 731(a)
and 752. That the so-called economic substance doctrine embodies
the foregoing principle of Gregory v. Helvering, supra, was
recently made clear by the Court of Appeals for the Federal
Circuit in Coltec Indus. Inc. v. United States, 454 F.3d 1340,
1353-1354 (Fed. Cir. 2006), which states:
The economic substance doctrine represents a
judicial effort to enforce the statutory purpose of the
tax code. From its inception, the economic substance
doctrine has been used to prevent taxpayers from
Page: Previous 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 Next
Last modified: March 27, 2008