holding that once a transaction is found to be a sham, section 6621(c) interest is imposed regardless of a taxpayer's investment motive
How later courts described this case
- holding that once a transaction is found to be a sham, section 6621(c) interest is imposed regardless of a taxpayer's investment motive
- the Tax Court has “never held that the mere presence of an individual’s profit objective will require [it] to recognize for tax purposes a transaction which lacks economic substance”
- cattle management operation lacks economic substance, found to be tax-motivated transaction despite showing that underpayment was involuntary or unintentional
- even if a taxpayer has a profit objective, the investment is not recognized for tax purposes if the transaction lacks economic substance
Written by the judges who cited it.
The opinion
SWIFT, J., concurring: I wish to explain my reason for concurring in the result reached by the majority in this case but for not joining the majority opinion. The majority opinion concludes that the transaction before us lacked economic substance and canriot be recognized for tax purposes. I agree with that result. The majority opinion, however, also implies that a taxpayer’s profit motive is not relevant or material to the determination of the economic substance of a transaction: With that proposition I disagree.
As we stated in Dreicer v. Commissioner, 78 T.C. 642, 645 (1982), affd. without opinion 702 F.2d 1205 (D.C. Cir. 1983), “[the taxpayer’s] motive is the ultimate question.” Among the factors that should be considered in analyzing the taxpayer’s motive are the economic substance of the transaction, and the testimony of the taxpayer concerning his intention and purpose for entering into the transaction. The taxpayer’s self-serving testimony obviously is not controlling. It must be weighed against other objective factors, but certainly the taxpayer’s testimony is relevant and material in the analysis of the economic substance of the transaction and in reaching the ultimate conclusion as to the taxpayer’s motive. Again, in Dreicer v. Commissioner, supra, we stated—
[the ultimate question] must be determined by a careful analysis of all the surrounding objective facts, and greater weight is given to such facts than to [the taxpayer’s] mere statement of intent. * * *
In this case, I would hold that petitioner’s testimony concerning his purpose for entering into the transaction and the objective facts, taken together, fail to establish that the transaction had economic substance and fail to establish that petitioner had an actual and honest profit objective for entering into the transaction.
JACOBS, J., agrees with this concurring opinion.