intended, not as the purchase price, but as a means of returning the earnings to the former owners of the business at a tax saving.
In Commissioner v. Brown, supra, tbe discounted sales price payable over a period of 10 years was found not to exceed significantly tbe underlying value of tbe business. In tbe case before us, tbe amount payable was grossly disproportionate to tbe present worth of tbe business. It was predicated solely on an assumed-earnings base, tbe realization of wbicb was not only subject to tbe risks of a bigbly competitive business, but was dependent on tbe continued managerial skills and services of tbe sellers. All tbe petitioners really bad to sell was "themselves."
In Commissioner v. Brown, supra, upon payment of tbe note, tbe exempt organization would acquire ownership of tbe assets wbicb were sold. In tbe case before us, once petitioners received payment in full, tbe temple was obligated to turn over approximately one-balf of a supposed $6 million business to its 4%-pereent partner, who bad invested nothing.
With these facts in mind, can it be said that the temple really purchased tbe stock of petitioners? Or, if we look to tbe substance of tbe transaction, was tbe temple merely attempting to extend its exemption to tbe earnings, which would be generated by tbe petitioners as managers of this business, for a fee?
While tbe transaction was in form a sale of stock by the petitioners, whether or not tbe temple would ever receive what it purported to buy was wholly Avitbin tbe petitioners' control. It was incumbent upon tbe selling stockholders, as managers of tbe business, to produce tbe income required to pay tbe notes as due. In tbe event that petitioners did not do so, there would be a default. Tbe only remedy in such case was tbe return of tbe business to tbe petitioners "including tbe Buyer's capital account in tbe business." The petitioners would get back everything.
Tbe failure of tbe price to bear any relationship to tbe value of assets sold, tbe dependency of earnings on tbe managerial skills of tbe sellers, tbe postponement of any realization by tbe temple of tbe benefits of tbe sale during a 13-year payout period, coupled with tbe fact that when that period expired tbe temple would receive only one-balf of what remained, lead inescapably to tbe conclusion that tbe transaction was in substance an agreement by the temple to lend its tax exemption to tbe petitioners for a period of years in exchange for a share in tbe tax savings resulting therefrom. These facts make this case distinguishable from Commissioner v. Brown, supra.
While we recognize the right of taxpayers to cast their plans in such manner as to minimize their tax liabilities, it is equally axiomatic that such plans must have substance in order to achieve tbe intended result. To treat the transaction presented in this case as a sale of a capital asset would be wholly inconsistent with the realities of