# James E. Sochin v. Commissioner of Internal Revenue, Dennis S. Brown v. Commissioner of Internal Revenue

> Court of Appeals for the Ninth Circuit · March 29, 1988 · 843 F.2d 351

URL: https://www.frixlaw.com/law-library/cases/9477413

## Case

- **Full name:** James E. SOCHIN, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee; Dennis S. BROWN, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee
- **Court:** Court of Appeals for the Ninth Circuit
- **Decided:** March 29, 1988
- **Citations:** 843 F.2d 351; 25 Fed. R. Serv. 316; 61 A.F.T.R.2d (RIA) 926; 1988 U.S. App. LEXIS 3889
- **Precedential status:** Published
- **Opinion:** Concurrence by Beezer
- **Judges:** Choy, Goodwin, Beezer
- **Cited by:** 140 later opinions in the Frix Law Library

## Citator (automated)

- **Red flag:** Abrogated on other grounds by Ivan K. Landreth Lucille Landreth v. Commissioner Internal Revenue Service, 859 F.2d 643 (1988).
- Negative treatments: 2
- Distinguished by: 0
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9477413

## How later opinions describe it (automated extraction)

- holding that a transaction was a sham because it had no “practical effects other than the creation of income tax losses”
- clarifying that disjunctive test that considers both subjective and objective factors, rather than “rigid two-step analysis,” is correct standard for economic substance doctrine
- holding a taxpayer’s minimal investment for ordinary losses and long- term gain was a sham
- affirming Tax Court’s conclusion, supported by twenty-eight pages of factual findings, that transactions were shams

## Opinion text

BEEZER, Circuit Judge,
concurring:
I cannot reconcile Bail Bonds By Marvin Nelson, Inc. v. Commissioner, 820 F.2d 1543 (9th Cir.1987) with our prior precedent. There, we applied the two-prong disjunctive test adopted by the Fourth Circuit in Rice’s Toyota World, Inc. v. Commissioner, 752 F.2d 89 (4th Cir.1985). Unlike the genuine recourse indebtedness in Rice’s, however, the transaction in Bail Bonds existed only on paper.
I believe that a transaction which is in substance only “financial gymnastics,” purely artificial, or a “paper chase” does not require any inquiry into the profit motive. Enrici v. Commissioner, 813 F.2d 293 , 295 n. 1 (9th Cir.1987); Mahoney v. Commissioner, 808 F.2d 1219, 1220 (6th Cir.1987); see Goldberg v. United States, 789 F.2d 1341 (9th Cir.1986) (affirming sham determination focusing entirely on economic substance); Neely v. United States, 775 F.2d 1092 (9th Cir.1985) (invalidating putative tax consequences of sham trust on grounds that it had “no economic effect other than to create income tax losses”); Thompson v. Commissioner, 631 F.2d 642 (9th Cir.1980) (economic substance); Karme v. Commissioner, 673 F.2d 1062 (9th Cir.1982) (economic substance). 1
*357 I express no opinion whether the two prong disjunctive test adopted in Rice’s properly applies to genuine transactions; such is not the case here.
The Tax Court should be affirmed.
. I agree with the opinions's footnote 6 which states that section 108 of the Deficit Reduction Act of 1984 does not apply to transactions that are not bona fide. For that reason, this court’s opinion in Wehrly v. United States, 808 F.2d 1311 (9th Cir.1986), and the Tenth Circuit’s recent opinion in Miller v. Commissioner, 836 F.2d 1274 (10th Cir.1988), are inapposite.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9477413. Public record. Not legal advice.