- 44 -
In this case, what “occurred” was a distribution of
nonmarketable22 notes in redemption of limited partnership
interests. Countryside undertook the distribution in order to
eliminate Mr. Winn and Mr. Curtis as limited partners. Mr. Winn
and Mr. Curtis agreed to the redemption in order to convert their
interests in Countryside into interest-bearing promissory notes.
All of the parties to the transaction had legitimate business
purposes, and the manner in which those parties accomplished
those purposes cannot be disregarded and converted by respondent
into a transaction (an exchange of Mr. Winn’s and Mr. Curtis’s
interests in Countryside for cash) that never occurred simply
because the transaction that did occur was tax motivated or, as
we stated in Hobby v. Commissioner, supra at 98523 “had a
22 As noted supra, we interpret respondent’s alternative
argument (i.e., alternative to his argument that the AIG notes
were marketable) to be that, even if the AIG notes were
nonmarketable, nonrecognition of gain under secs. 731(a)(1) and
752 is not achievable because of the lack of economic substance.
23 While we have not undertaken an exhaustive analysis of
all cases in which the Commissioner has invoked the economic
substance doctrine, we have not found any case applying that
doctrine in the manner sought by respondent herein. For example,
in Coltec Indus. Inc. v. United States, 454 F.3d 1340 (Fed. Cir.
2006), Boca Investerings Pship. v. United States, 314 F.3d 625
(D.C. Cir. 2003), and ACM Pship. v. Commissioner, 157 F.3d 231
(3d Cir. 1998), affg. in part and revg. in part T.C. Memo. 1997-
115, the tax-motivated transaction and/or the resulting favorable
tax impact on the taxpayer were simply disregarded. In Del
Commercial Props., Inc. v. Commissioner, 251 F.3d 210 (D.C. Cir.
2001), affg. T.C. Memo. 1999-411, and H.J. Heinz Co. v. United
States, 76 Fed. Cl. 570 (2007), the transaction that, in fact,
did occur was recast for tax purposes by disregarding only the
tax-motivated steps. In Gregory v. Helvering, 293 U.S. 465
(1935), and Goldstein v. Commissioner, 364 F.2d 734 (2d Cir.
1966), affg. 44 T.C. 284 (1965), the transaction that did occur
(continued...)
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