As the number of detailed statutory provisions designed to combat specific perceived tax abuses proliferates, it can be easy to lose sight of the continued importance of judicial principles, such as the step transaction doctrine, that have for decades been used by the Internal Revenue Service and the courts to deny to taxpayers the benefits that they have sought from tax-motivated transactions. A recent Tax Court memorandum decision, involving a taxpayer’s effort to shift an unrealized capital loss from the taxpayer to a corporation that had recognized a large capital gain, so that the loss could be used to offset the gain, is an important and timely reminder of the continued vitality of the step transaction doctrine, even though the specific transaction at issue in that case is unlikely to be repeated in light of a statutory change that became effective in one of the years at issue.
‘G.D. Parker v. Commissioner‘1
G.D. Parker (petitioner), a Florida corporation incorporated by Genaro Delgado Parker, a citizen of Peru, served as a holding company for Parker’s interests in businesses located in the United States and for property not used to a substantial degree in any business. Parker owned the stock of petitioner through a Panama corporation, Vilanova, S.A. (Vilanova).
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