t c memo united_states tax_court gateway hotel partners llc gateway interest acquisition corp tax_matters_partner petitioner v commissioner of internal revenue respondent docket no filed date philip karter dustin m covello and herbert odell for participants dana e hundrieser and lawrence c letkewicz for respondent memorandum findings_of_fact and opinion goeke judge the issues in this case arise out of the financing and redevelopment of the former statler and lennox hotels two historic properties in downtown st louis missouri respondent issued a notice of final_partnership_administrative_adjustment fpaa for and years at issue under sec_6223 to gateway hotel partners l l c ’s ghp former tax_matters_partner in the fpaa respondent made certain adjustments to the income expense and deduction items ghp reported on forms u s return of partnership income and imposed accuracy-related_penalties under sec_6662 ghp’s former tax_matters_partner filed on ghp’s behalf a petition for redetermination of partnership items the parties have settled several issues however there remain three issues for decision the principal issue is whether ghp must recognize dollar_figure of income from three transfers it made of certain missouri historic preservation tax_credits mhtcs in the answer turns on whether the transfers represented partnership_distributions or taxable sales we hold that two of the transfers were properly characterized as partnership_distributions however a portion of the third transfer produced a taxable sale and we sustain respondent’s determination with respect to that portion the second issue is whether ghp must include in income the return of dollar_figure that it had previously contributed to a fund established in connection with the hotel project we hold the return is not unless otherwise indicated all section references are to the internal_revenue_code in effect for the years at issue and all rule references are to the tax_court rules_of_practice and procedure all amounts are rounded to the nearest dollar includible in income the final issue is whether ghp is liable for the accuracy-related_penalty for on the portion of any underpayment resulting from ghp’s purported sale of the mhtcs we sustain the accuracy-related_penalty resulting from the underpayment attributable to the nondistribution portion of the third transfer findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts the supplemental stipulation of facts and the attached exhibits are incorporated by this reference i hotel project background in the late 1990s the city of st louis sought to spur the private development of a big_number room hotel project near its downtown convention center a major aspect of the city’s plan was to encourage the rehabilitation of the historic statler and lennox hotels and the construction of complimentary facilities adjacent to the convention center collectively hotel project financing for the hotel project was expected to come from public sources including tax increment financing revenue bonds hud grants federal and state tax-credit equity and private funding ii hotel project participants a owner ghp was organized to own develop construct and operate the rehabilitation portion of the hotel project ghp elected partnership treatment for federal tax purposes and its principal_place_of_business was in missouri when the petition was filed at all relevant times washington avenue historic developer wahd a missouri limited_liability_company and housing horizons llc hh a texas limited_liability_company were ghp’s members at all relevant times ghp’s profits and losses were allocated to wahd and to hh under ghp’s amended and restated operating_agreement ghp amended operating_agreement b developer wahd was engaged by ghp to perform on its behalf development services in connection with the hotel project it was responsible for all the day-to-day operations of ghp including procuring hotel project financing and managing the various aspects of the development and construction of the hotel project wahd a related_entity gateway tower partners l l c was organized to construct and own a new hotel tower intended to accompany the historic rehabilitation the aspects of the hotel project that concern this entity are not germane to this case was ghp’s managing member and tax_matters_partner and held a membership interest in ghp wahd elected partnership treatment for federal tax purposes wahd was majority owned and controlled by historic restoration inc hri hri was wahd’s managing member hri was a real_estate developer engaged in adaptive reuse of historic structures among other real_estate activities and was based in new orleans louisiana hri elected s_corporation treatment for federal tax purposes c investor hh was a passive investor in the hotel project and held a membership interest in ghp hh was majority owned and controlled by kimberly-clark corp kc a delaware corporation hh and kc collectively participating partners elected to participate in these proceedings pursuant to sec_6226 and rule b iii mhtcs as a source of financing one of the sources of financing hri planned to use to finance the hotel project was mhtcs it expected to receive from the completion of the hotel project the mhtc program started in the mhtc program’s purpose is to aid in the redevelopment of historic structures in the state of missouri under the program any person firm partnership trust estate or corporation incurring qualifying costs and expenses for the rehabilitation of eligible_property is entitled to mhtcs the amount of mhtcs available i sec_25 of the total costs and expenses of the rehabilitation mhtcs were not earned or issued until the completion of the relevant rehabilitation project taxpayers having earned mhtcs could transfer sell or assign them a taxpayer desiring to receive mhtcs must apply to the missouri department of economic development mded for such credits through a multistep application procedure in connection with the hotel project ghp applied for entrance into the mhtc program in date the mded granted preliminary approval of ghp’s application in date it granted final approval iv the bridge loan financing the mhtcs hri expected to use as a source of financing were not available until completion of the hotel project to include the mhtcs as a source of funds at the beginning of the hotel project bridge financing was required the missouri development finance board mdfb was approached about making a dollar_figure bridge loan to hri in connection with the hotel project the mdfb is an agency created by statute as a body corporate and politic its mission is to assist infrastructure and economic development projects in missouri by providing financial support for otherwise unfeasible projects that private lenders are unwilling to finance the mdfb is self-funded and the funds that it lends for development projects typically come from the issuance of revenue bonds a due diligence the mdfb undertook due diligence to determine hri’s creditworthiness in particular it sent several representatives to hri’s new orleans louisiana headquarters to review its financial records ultimately the mdfb satisfied itself that hri had sufficient potential assets in the event of a default on the bridge loan the mdfb viewed hri as a more reliable borrower than ghp because ghp was a single-project company whose assets were limited to the hotel project whereas hri was not b authority to enter into the bridge loan agreement the mdfb passed a board resolution authorizing its participation in the hotel project and authorizing it to make the bridge loan to hri hri wahd and ghp all executed closing certificates for the hotel project financing containing certain resolutions to enter into the bridge loan agreement the hri closing certificate contains a resolution under which hri resolves to enter into the bridge loan agreement on its own behalf on behalf of wahd and on behalf of ghp the wahd closing certificate contains a resolution under which wahd resolves to enter into the bridge loan agreement on behalf of ghp finally the ghp closing certificate contains a resolution under which ghp resolves to enter into the bridge loan agreement c the bridge loan agreement in date hri entered into the bridge loan agreement with the mdfb the bridge loan agreement designated hri as the borrower of the bridge loan the bridge loan agreement recitals reflect that hri applied for the bridge loan for the purpose of providing funds to wahd to make a capital_contribution to ghp the bridge loan agreement reflects that the bridge loan matured in date or upon the final payment for the purchase of mhtcs under a certain tax_credit purchase agreement discussed infra it also reflects that the principal_amount of the bridge loan bore interest at an annual rate of it further reflects that hri was required to deposit with the mdfb dollar_figure to prepay two years of interest on the bridge loan to induce the mdfb to make the bridge loan hri made various nonmonetary representations covenants and warranties on behalf of ghp and wahd for example hri represented and warranted on ghp’s and wahd’s behalf that their assets and interests in the hotel project were free and clear of all liens and encumbrances they did not have knowledge of pending litigation against them they would use the bridge loan proceeds only as specified in the bridge loan agreement they were not in default they had not incurred any material liabilities and had not entered into any material transactions and they did not have knowledge of certain environmental issues concerning the hotel project properties hri executed the bridge loan agreement as the borrower on a signature page for acknowledging and approving the form of the bridge loan agreement a representative of hri signed the bridge loan agreement on behalf of wahd and ghp the mdfb intended hri to be the sole borrower and be solely liable for repayment of the bridge loan in the event of default v contributions of the bridge loan proceeds under the first amendment to wahd’s operating_agreement wahd amended operating_agreement hri agreed to make a capital_contribution of the bridge loan proceeds to wahd hri contribution concurrently with the funding of the bridge loan and wahd was in turn required to contribute those proceeds to ghp hri was entitled to a preferred_return on the hri contribution from the date of the contribution until an extraordinary event distribution ie a distribution received by wahd from ghp because of an extraordinary event as defined in the ghp amended operating_agreement upon an extraordinary event hri was entitled to a preferred_return of capital with a distribution of net cashflow or alternatively a distribution_of_property having an agreed fair_market_value equal to hri’s contribution plus any accrued but unpaid preferred_return thereon through the date of such return_of_capital similarly under the ghp amended and restated operating_agreement ghp amended operating_agreement wahd was to immediately use the bridge loan proceeds contributed by hri to make an dollar_figure capital_contribution to ghp wahd contribution under sec_4 of the ghp amended operating_agreement wahd was entitled to an annual preferred_return of on the wahd contribution payable out of operating profits to the extent of available cashflow from the date of contribution until the occurrence of an extraordinary event the ghp amended operating_agreement defines an extraordinary event as the creation of new property by ghp other than the completion of the project or any portion thereof the creation of which is subject_to the entrepreneurial risks of development construction and completion any distribution with respect to which occurs more than months after the date the wahd contribution is made the definition of extraordinary event includes the issuance of mhtcs upon the occurrence of an extraordinary event wahd was entitled to a preferred_return of capital from ghp under sec_4 of the ghp amended operating_agreement which provides in pertinent part upon the occurrence of an extraordinary event wahd shall be entitled to a preferential return_of_capital wahd’s preferred_return of capital right in the form of a distribution of available cash_flow subject_to the provisions of the master indenture or alternatively in the sole discretion of hh a distribution_of_property having an agreed fair_market_value equal to the wahd contribution plus any accrued but unpaid preferred_return thereon through the date of such return_of_capital vi securing repayment of the bridge loan the mdfb required hri to provide certain security for the bridge loan in this connection the mdfb and hri executed a collateral_assignment agreement hri collateral_assignment agreement i under which hri collaterally assigned to the mdfb and granted it a security_interest in all beneficial rights hri had with respect to its membership interest in wahd hri also executed a collateral_assignment agreement under which hri assigned and granted the mdfb a security_interest in all rights hri might have from the sale of the mhtcs it expected to receive as a preferred_return of capital discussed infra similarly hri required wahd to provide it with certain security for the hri contribution to this end hri and wahd executed a collateral_assignment agreement wahd collateral_assignment and recorded a financing statement with the state of missouri through the wahd collateral_assignment and the corresponding financing statement wahd assigned to hri and granted hri a security_interest in all its benefits payments and other rights under the ghp amended operating_agreement and under the master credit and disbursement indenture master indenture including rights to insurance proceeds relating to the issuance or nonissuance of mhtcs expected to be generated by the completion of the hotel project the wahd collateral_assignment contained an intervention section with certain terms and provisions to which hh agreed in paragraph f of the intervention hh agreed to waive certain rights relating to the wahd contribution as follows notwithstanding any other provisions of the ghp amended operating_agreement to the contrary only assignor wahd shall be entitled to the rights provided for in sec_4 thereof and housing horizons hh hereby waives any interest it may have in such rights and covenants and agrees that if and when such rights become due and owing such amounts due shall be distributable to and be the sole property of assignor wahd or its pledgees free and clear of any encumbrances of the ghp amended operating_agreement and housing horizons hh waives any right or claims it may have with respect to such amounts due including any rights created by operation of law or by the ghp amended operating_agreement the mdfb also recorded with the state of missouri a financing statement ghp financing statement listing ghp as the debtor and the mdfb as the secured party the financing statement reflects that it covers the following types of property all benefits payments and other rights ghp might have under any and all insurance policies relating to the issuance or nonissuance of mhtcs as a result of damage to or destruction of the hotel project the record does not reflect that ghp executed a collateral_assignment agreement or security_agreement corresponding to the ghp financing statement vii plan and agreement to sell expected mhtcs hri anticipated that ghp would earn a certain amount of mhtcs from the hotel project and distribute those mhtcs as a preferred_return of capital to wahd who hri expected would make a further distribution of mhtcs to it as a preferred_return of capital in anticipation of receiving the credits hri entered into a tax_credit purchase agreement with firstar community development corp firstar cdc under the terms of the tax_credit purchase agreement firstar cdc in date this entity became a subsidiary of u s bancorp and changed its name to u s bancorp community development corp however the distinction between these entities in their pre- and post-acquisition forms is irrelevant for purposes of this case therefore for convenience the designation firstar cdc will be used to refer to this entity both before and after it was acquired by u s bancorp agreed to purchase up to a certain amount of mhtcs expected to be generated by the hotel project for cents per dollar_figure of credit when the tax_credit purchase agreement was executed hri assigned its right to the payment of the purchase_price for the mhtcs to the mdfb viii relevant aspects of the hotel project development and construction a development agreement wahd agreed to provide development services for the hotel project under a development agreement that it entered into with ghp the development services included identifying and negotiating financing for the hotel project overseeing construction services and other matters related to the completion of the hotel project under the development agreement ghp promised to pay wahd for its services a development fee not to exceed dollar_figure the development fee was to be paid in installments on the hotel project closing date ghp was required to pay the first installment of dollar_figure of the deferred developer fee to wahd and deposit dollar_figure into the deferred- development-fees fund established by the master trustee of the master indenture and upon receipt of certain brownfield tax_credits a tax incentive for environmental remediation ghp was required to deposit an additional dollar_figure in the deferred-development-fees fund the installments from the deferred-development-fees fund were to be paid in the following manner the first installment was to be paid upon completion of the lennox hotel rehabilitation the second installment upon the commencement- of-operations date of the hotel project and the final installment upon the achievement of a certain debt service coverage ratio for one full fiscal_year after the commencement-of-operations date the master indenture provided that the deferred portion of the funds in the deferred-development-fees fund could be used by the master trustee to fund certain deficits including ghp operating deficits under the ghp amended operating_agreement wahd promised to fund ghp’s operating deficits by transferring up to of certain fees paid to it by ghp including the deferred development fees operating deficit guaranty the ghp amended operating_agreement provides that any transfer from the deferred-development-fees fund shall be treated as a deemed payment by wahd to ghp in satisfaction of its operating deficit guaranty the ghp amended operating_agreement instructs that such a deemed payment shall not be treated as a loan or capital_contribution to ghp and the deemed payment of such amounts shall not affect the membership interests or allocations of ghp’s profits and losses to its members b master credit and disbursement indenture ghp entered into the master indenture to incur certain indebtedness to pool credit resources and to promote the efficient financing of the hotel project state street bank trust co of missouri n a was named master trustee under the master indenture under the master indenture ghp along with other hotel project participants were required to make certain representations and warranties it also required financing from all sources including the bridge loan proceeds to be deposited with the master trustee in a project fund that contained various accounts the master trustee was to disburse the funds in accordance with the hotel project budget and other specified terms and conditions contained in the master indenture including certain restrictions and priorities regarding the use of project funds the master indenture required ghp to immediately pay dollar_figure of the deposited bridge loan proceeds to wahd as a prepaid preferred_return on the wahd contribution that wahd agreed to make to ghp wahd was to pay the same amount to hri as a prepaid preferred_return on the hri contribution that hri agreed to make to wahd hri agreed to collaterally pledge its rights with in state street bank trust co of missouri n a was acquired by umb bank which became the master trustee the distinction between these two entities is irrelevant for purposes of this case therefore both are referred to herein as the master trustee respect to such payments to secure its obligations to the mdfb including its obligation to prepay two years of interest on the bridge loan in satisfaction of the foregoing series of obligations the master trustee was to transfer dollar_figure of the bridge loan proceeds to the mdfb at closing as prepaid_interest from hri on the bridge loan under the master indenture ghp was required to and in fact did obtain insurance to protect the hotel project against financial losses including losses of federal and state tax_credit equity caused by property damage or casualty ix operative events occurring on or after closing of the hotel project a disbursement of the bridge loan proceeds and prepayment of interest and fees on the bridge loan the dollar_figure of bridge loan proceeds was transferred to and deposited directly with the master trustee of the master indenture the direct transfer of the bridge loan proceeds to the master trustee’s account was consistent with the mdfb’s normal procedures for loan closings the master trustee used the deposited bridge loan proceeds to prepay the interest required under the bridge loan agreement b transfer from the deferred-development-fees fund to ghp to fund operating deficits as of date ghp had an operating deficit shortly thereafter dollar_figure of the unpaid deferred development fee was contributed back to ghp to fund its operating deficits in accordance with the master indenture ghp treated these draws as an equity contribution from wahd for accounting purposes likewise ghp reported the transfer as an equity contribution by wahd on its tax_return c receipt and transfer of hotel project mhtcs ghp qualified for and received the mhtcs on two occasions in the mded transferred dollar_figure of mhtcs lennox mhtcs to ghp on date after ghp completed the lennox hotel rehabilitation per hri’s instructions the mded transferred those mhtcs first to hri as wahd’s assignee and then to firstar cdc in accordance with the tax_credit purchase agreement hri sent the mded a letter in date instructing it to transfer these mhtcs first from ghp to hri as wahd’s assignee then from hri to firstar cdc contrary to these instructions on date the mded inadvertently transferred the mhtcs directly from ghp to firstar cdc ie omitting hri when this occurred the mded was contacted to request that it reissue and transfer the mhtcs correctly as instructed consequently on date the mded voided the june transfer and documented new transfers consistent with continued the completion of the statler hotel rehabilitation caused the hotel project to incur more mhtc-eligible expenses than anticipated and thus earn more mhtcs than had been initially anticipated on date in anticipation of ghp’s receiving mhtcs from the statler hotel rehabilitation hri on ghp’s behalf instructed the mded in certain missouri forms htc-t and cover letters accompanying those forms to transfer statler-related mhtcs with a credit value of dollar_figure from ghp to hri in satisfaction of wahd’s and hri’s respective preferred equity and instructed that any excess mhtcs be transferred on ghp’s behalf to firstar cdc on date the mded issued statler-related mhtcs to ghp entitling their holder to a tax_credit equal to dollar_figure that same day consistent with hri’s december instructions the mded transferred dollar_figure of mhtcs statler tranche mhtcs from ghp to hri as wahd’s assignee and then to firstar cdc also pursuant to hri’s december instructions the mded transferred the remaining dollar_figure of statler-related mhtcs statler tranche mhtcs from ghp to firstar cdc in continued hri’s instructions ie from gateway to hri as wahd’s assignee to firstar cdc because the june transfer was voided within the taxable_year under the rescission_doctrine that transfer had no effect for tax purposes see revrul_80_58 1980_1_cb_181 exchange for the statler tranche mhtcs firstar cdc transferred certain proceeds to the mdfb which it applied against the bridge loan balance on date an accounting firm representing ghp notified the mded that the amount of mhtcs that ghp requested to be transferred on the relevant missouri forms htc-t was incorrect the accounting firm requested that the mded void the initial date transfer of the statler tranche mhtcs and the statler tranche mhtcs and retransfer ghp’s mhtcs to that end it provided the mded with new missouri forms htc-t requesting the transfer of mhtcs with a credit value of dollar_figure from ghp to hri and then from hri to firstar cdc and requesting the transfer of mhtcs with a credit value of dollar_figure the remaining mhtcs from ghp to firstar cdc it also requested that the mded change its records to reflect the new requested transfer amounts of mhtcs the mded accepted the new missouri forms htc-t and changed its transfer records accordingly d repayment of the bridge loan the bridge loan was repaid in with proceeds from the sale of certain mhtcs to firstar cdc x reporting positions ghp filed a form_1065 for the form_1065 does not reflect that ghp received a capital_contribution from wahd equal to the amount of the bridge loan proceeds additionally ghp’s financial statements for do not reflect such a capital_contribution either the record does not reflect that hri reported making an dollar_figure capital_contribution to wahd on its financial statements or tax_return similarly the record does not reflect that wahd reported making an dollar_figure capital_contribution to ghp on its financial statements or tax_return ghp filed a form_1065 for ghp’s form_1065 for and its financial statements for that year do not reflect that it made a distribution of mhtcs in any amount to wahd additionally wahd’s form_1065 for does not reflect it received a distribution of mhtcs from ghp or that it made a distribution of mhtcs to hri likewise hri’s financial statements and its federal tax_return for do not reflect that it received a distribution of mhtcs from wahd ghp did not report on any federal tax_return that it had income from its transfers of the lennox mhtcs the statler tranche mhtcs and dollar_figure credit value of the statler tranche mhtcs ghp also did not report as income on any federal tax_return its receipt of the dollar_figure transferred to it from the deferred-development-fees fund xi tax opinion the law firm of baker mckenzie provided a tax opinion regarding whether a distribution of mhtcs by ghp to wahd would be respected as a distribution to a recipient partner or recharacterized as some form of taxable transaction the tax opinion was rendered before ghp made any transfers of the mhtcs it received from the hotel project it does not address ghp’s attempt to rescind the initial date transfer of the statler tranche mhtcs or the treatment of their transfer to firstar cdc xii the fpaa respondent issued wahd ghp’s tax_matters_partner an fpaa covering and the fpaa determined that ghp failed to report dollar_figure of income from its transfers of the lennox mhtcs the statler tranche mhtcs and the statler tranche mhtcs respondent also determined that ghp failed to consistent with its view that the initial transfer of the statler tranche mhtcs was ineffective ghp took the position that it sold the statler tranche mhtcs having a credit value equal to dollar_figure and reported on its return the corresponding sale proceeds totaling dollar_figure report as income dollar_figure transferred to it from the deferred- development-fees fund wahd filed a petition on behalf of ghp seeking a redetermination of the adjustments in the fpaa opinion we must decide whether ghp must include in income dollar_figure of gain from certain transfers it made of mhtcs we also must decide whether ghp must include in income money transferred to it from the deferred-development- fees fund finally we must decide whether ghp is liable for the accuracy-related_penalty we first address the burden_of_proof i burden_of_proof the taxpayer generally bears the burden of proving the commissioner’s determinations are erroneous rule a the burden_of_proof may shift to the commissioner if the taxpayer satisfies certain conditions sec_7491 participating partners have not argued that sec_7491 applies nor established their compliance with its requirements therefore the burden_of_proof remains on participating partners see rule a ii tax consequences of ghp’s mhtcs transfers respondent contends that ghp sold the lennox mhtcs the statler tranche mhtcs and the statler tranche mhtcs to firstar cdc and failed to report dollar_figure of taxable gain from the sales participating partners contend that ghp’s transfer of the relevant mhtcs should be respected as a nontaxable partnership_distribution under sec_731 we first address the treatment of ghp’s transfers of the lennox mhtcs and the statler tranche mhtcs and then turn to the treatment of the statler tranche mhtcs a lennox mhtcs and statler tranche mhtcs participating partners contend that the mdfb made the bridge loan to hri that hri contributed the bridge loan proceeds to wahd in exchange for preferred-equity rights and that wahd contributed those same proceeds to ghp in exchange for preferred-equity rights they further contend that ghp’s transfers of the lennox mhtcs and the statler tranche mhtcs to hri as wahd’s assignee were distributions in redemption of wahd’s preferred equity on this basis they take the position that ghp’s transfer of mhtcs is properly characterized as a distribution by a partnership to a partner and thus assert that no gain_or_loss is recognizable on the transfers under sec_731 respondent contends that the transfers of mhtcs to hri as wahd’s assignee did not redeem wahd’s preferred equity because wahd never made the relevant preferred-equity contribution respondent argues that even if ghp’s transfer of the lennox and statler tranche mhtcs were made in redemption of wahd’s preferred equity the transactions should be recast as taxable sales under the substance_over_form_doctrine the step_transaction_doctrine or disguised sale concepts sec_731 provides no gain_or_loss shall be recognized to a partnership on a distribution to a partner of property including money for reasons elucidated below we agree with participating partners that ghp’s transfers of the lennox mhtcs and the statler tranche mhtcs are properly characterized as distributions in redemption of wahd’s preferred equity and we disagree with respondent that the relevant transactions should be recast as taxable sales accordingly we hold that under sec_731 ghp was not required to recognize any gain_or_loss on the transfers of the lennox mhtcs and statler tranche mhtcs we now turn to the findings and reasoning on which we base our holding whether ghp’s transfers of the lennox mhtcs and the statler tranche mhtcs were preferred-equity distributions respondent argues that ghp’s transfers of the lennox mhtcs and the statler tranche mhtcs were not a redemption of wahd’s preferred equity for two main reasons first respondent contends that the transfers could not have been distributions in redemption of wahd’s preferred equity because the bridge loan was made directly to ghp thus precluding wahd from having made the capital_contribution that participating partners contend entitled it to a preferred-equity distribution of the relevant mhtcs second respondent contends that irrespective of the borrower’s identity under the bridge loan wahd never actually contributed the bridge loan proceeds to ghp since they were transferred directly from the mdfb to ghp we agree with respondent that if the bridge loan was made to ghp then hri could not have made the relevant capital_contribution that would entitle it to a preferred-equity distribution of the lennox mhtcs and the statler tranche mhtcs however we disagree with respondent’s second contention that the mdfb’s transfer of the bridge loan proceeds directly to ghp precludes wahd from having made a capital_contribution of those same proceeds to ghp and we dispense with it now hri was obligated under its operating_agreement to contribute the bridge loan proceeds to wahd and wahd was obligated under its operating_agreement to contribute those same proceeds to ghp to obviate the need for three separate transfers mdfb dispensed the proceeds directly to ghp if hri was the borrower under the bridge loan agreement we find the single transfer in substance resulted in deemed capital contributions from hri to wahd and then from wahd to ghp thus whether wahd made a capital_contribution entitling it to a preferred- equity distribution of the lennox mhtcs and the statler tranche mhtcs depends on whether hri or ghp was the borrower under the bridge loan respondent argues that the form and substance of the bridge loan reflect that it was made solely to ghp participating partners argue the form and substance of the bridge loan reveal that hri was the true borrower a form of the bridge loan state law determines the legal interests and rights upon which federal_income_tax consequences depend 472_us_713 309_us_78 under missouri law the obligor of a loan is generally the party designated as the borrower in the governing loan instruments see generally ethridge v tierone bank s w 3d mo hri was the designated borrower in the bridge loan agreement and executed it as such moreover the bridge loan agreement does not reference any other person as the borrower respondent argues for two main reasons that despite hri’s designation as the borrower under the bridge loan agreement the form of the transaction reflects that ghp was the borrower first respondent contends that ghp was the borrower because hri entered into the bridge loan agreement solely in its representative capacity on behalf of ghp we agree with respondent that if ghp entered into the bridge loan solely in a representative capacity on behalf of ghp that would lend support to respondent’s claim that the form of the bridge loan transaction reflects ghp was the borrower however the record does not reflect that hri entered into the bridge loan agreement or served as the borrower solely in a representative capacity on behalf of ghp as support for the contention that hri acted solely in a representative capacity respondent points to certain certified resolutions of ghp wahd and hri those resolutions together grant hri authority to enter into the bridge loan agreement on its own behalf and on behalf of wahd and ghp respondent argues that these resolutions show that hri acted as ghp’s agent in borrowing the bridge loan proceeds and thus bound ghp to repay the bridge loan we disagree it does not necessarily follow from the resolutions that hri borrowed the funds under the bridge loan or entered into the bridge loan agreement solely in its representative capacity all the resolutions show is that hri had authority to enter into the bridge loan agreement on its own behalf and on behalf of ghp they do not show how hri exercised that authority accordingly we look to the bridge loan agreement to determine the manner and capacity in which hri exercised its authority to enter into the bridge loan agreement the bridge loan agreement does not reflect that hri acted as ghp’s agent or solely in a representative capacity in borrowing the proceeds under the bridge loan as previously mentioned the bridge loan agreement designates hri as the unequivocal borrower and hri signed its name under the borrower signature block in its individual capacity not on behalf of ghp or as ghp’s agent instead the bridge loan agreement reveals that hri exercised its authority to enter into the bridge loan agreement on behalf of ghp only with respect to certain warranties representations and covenants none of the representations covenants or warranties obligated ghp to repay the bridge loan principal or interest accruing thereon so while hri did have authority to enter into the bridge loan agreement on behalf of ghp the bridge loan agreement establishes that hri did not exercise that authority so as to bind ghp to repay the bridge loan respondent argues that ghp’s approval of the form of the bridge loan agreement shows that hri entered into the bridge loan agreement on behalf of ghp while it is true that ghp as well as wahd executed the bridge loan agreement in addition to hri the bridge loan agreement reflects that ghp executed it only for purposes of approv ing its form such approval in and of itself does not obligate ghp to repay the bridge loan principal or interest cf ethridge s w 3d pincite wife’s signature underneath the signature block on a deed_of_trust does not change the deed’s plain description of the husband as the sole borrower respondent secondly contends that the form of the bridge loan transaction reflects that ghp was the bridge loan borrower because ghp obligated itself to repay the bridge loan by transferring its mhtc rights to the mdfb through the wahd collateral_assignment agreement including the attached intervention by hh and the ghp financing statement the record does not support the predicate for respondent’s claim ghp did not execute a collateral_assignment agreement or otherwise assign its mhtc rights under sec_4 of the ghp amended operating_agreement wahd was entitled to a preferred_return of capital upon the issuance of the mhtcs in the form of a distribution of available cash_flow or alternatively in the sole discretion of hh a distribution_of_property having an agreed fair_market_value equal to the wahd contribution amount accordingly hh could prevent a transfer of the mhtcs under the ghp amended operating_agreement respondent argues however that hh waived this right under paragraph f of the intervention attached to the wahd collateral_assignment participating partners dispute that hh waived the right the parties’ dispute over the meaning of paragraph f of the intervention presents an issue of contract interpretation the wahd collateral_assignment agreement and the attached intervention are governed by missouri law the cardinal principle of contract interpretation is to ascertain the intention of the parties and to give effect to that intent dunn indus group inc v city of sugar creek s w 3d mo per curiam in interpreting a contract we read the contract as a whole and give its terms their plain ordinary and usual meaning id we also construe each of the contract’s terms to avoid rendering the other terms meaningless and we prefer a construction that attributes a reasonable meaning to all the provisions of the agreement to one that leaves some of the provisions without function or sense id the parties’ intent is determined on the basis of language in the contract alone unless the contract is ambiguous 440_f3d_1019 8th cir applying missouri law an ambiguity is not created simply because the parties disagree about the contract’s interpretation id the test rather is ‘whether the disputed language in the context of the entire agreement is reasonably susceptible of more than one construction giving the words their plain and ordinary meaning as understood by a reasonable average person ’ id quoting speedie food mart inc v taylor s w 2d mo ct app with these principles in mind we turn to paragraph f of the intervention paragraph f provides notwithstanding any other provisions of the ghp amended operating_agreement to the contrary only assignor wahd shall be entitled to rights provided for in sec_4 thereof and housing horizons hh hereby waives any interest it may have in such rights and covenants and agrees that if and when such rights become due and owing such amounts due shall be distributable to and be the sole property of assignor wahd or its pledgees free and clear of any encumberances of the ghp amended operating_agreement and housing horizons hh waives any rights or claims it may have with respect to such amounts due including any rights created by operation of law or by the ghp amended operating_agreement the critical question is what are the rights provided for in sec_4 of the ghp amended operating_agreement to which paragraph f refers is it the preferred_return right and the preferred_return of capital right hh’s right to decide to satisfy wahd’s right to a preferred_return of capital with a distribution from available cashflow or with a distribution_of_property eg the mhtcs or both we think the wahd collateral_assignment agreement taken as a whole and in context unambiguously reflects that the rights provided for in sec_4 means the preferred_return right and preferred_return of capital right paragraph f states that only wahd shall be entitled to the rights provided for in sec_4 paragraph f goes on to provide that hh waives any interest it may have in such rights and agrees that if and when such rights become due and owing such amounts due shall be distributable to and be the sole property of wahd emphasis added we think a plain reading of such rights due and owing means rights that give rise to an obligation to make payment ie of money or property our interpretation is bolstered by the phrase such amounts due modifying such rights become due and owing the modification indicates the rights provided for in sec_4 are the kind that give rise to an obligation to make a payment of an amount hh’s discretionary right to decide how to satisfy wahd’s preferred_return of capital right did not give rise to a payment obligation or any other obligation for that matter it simply gave hh the right to decide the form of the payment obligation arising from the preferred_return of capital right accordingly we do not read paragraph f as respondent urges to remove hh’s discretion to for the relevant parts of sec_4 see supra p decide how to satisfy the preferred_return of capital right we therefore reject respondent’s argument that the wahd collateral_assignment agreement effectively obligated ghp to repay the bridge loan respondent also argues that ghp transferred its rights to receive the mhtcs to the mdfb through the ghp financing statement thus demonstrating ghp was responsible for repaying the bridge loan again we disagree a financing statement’s purpose is to give notice to a third party to make further inquiry as to specific collateral 273_br_789 bankr w d mo while a financing statement may in limited circumstances give rise to a security_interest in a purported obligor’s property it generally does not see 472_f2d_1118 8th cir centerre bank nat’l ass’n v mo farmers ass’n inc s w 2d mo ct app a financing statement is merely evidence of the creation of a security_interest and does not itself constitute a security_agreement rather the creation of an enforceable security_interest is created by a security_agreement see centerre bank nat’l ass’n s w 2d pincite the record does not reflect that ghp executed any agreement specifically referred to as the security_agreement or otherwise functioning as a security_agreement that corresponds to the ghp financing statement while a financing statement may constitute a security_agreement if certain requirements are met we find that this financing statement does not a security_agreement must contain granting language that conveys a security_interest in the relevant property shelton f 2d pincite listing covered collateral is insufficient to grant a security_interest see starman v john wolfe inc s w 2d mo ct app see also 45_br_370 bankr s d n y needle v lasco indus inc cal rptr ct app an examination of the ghp financing statement reveals that it merely describes covered collateral it does not contain language granting the mdfb a security_interest in the covered collateral accordingly the ghp financing statement fails to convey to the mdfb a security_interest in the covered property described in the ghp financing statement another reason the financing statement fails to create a security_interest is that it does not identify the obligation to be secured_by the covered collateral a security_interest provides an interest in collateral that secures payment or performance of an obligation needle cal rptr pincite at a minimum then a security_agreement must recite the obligation to be secured see in re modafferi b r pincite needle cal rptr here nothing on the face of the ghp financing statement indicates the obligation that the covered collateral is to secure because the ghp financing statement does not constitute a security_agreement it failed to create a security_interest in any of ghp’s property respondent’s argument that ghp transferred its rights to receive the mhtcs to the mdfb through the ghp financing statement is predicated on its having created a security_interest in ghp’s rights to the expected mhtcs in favor of the mdfb as a result respondent’s argument fails in conclusion we find that the form of the bridge loan transaction reflects that hri not ghp was the borrower and we do not find persuasive any of respondent’s arguments to the contrary b substance of the bridge loan i the substance_over_form_doctrine respondent contends that even if the form of the bridge loan transaction reflects that hri was the borrower the substance of the transaction reveals that ghp not hri was the true borrower participating partners dispute that ghp was the borrower in substance it is well established that the tax consequences resulting from a transaction depend on the transaction’s substance rather than its form 324_us_331 the incidence of taxation depends upon the substance of a transaction 293_us_465 95_tc_257 t he substance of the transaction is controlling not the form in which it is cast or described a loan in essence involves a transaction whereby one person the lender advances money to another the borrower for her promise to repay it upon such terms as to time and rate of interest or without interest as the parties may agree see 204_f3d_1228 9th cir aff’g tcmemo_1998_121 accordingly a borrower’s essential obligation is to repay the loan given this we think a person bearing the economic risk of loss for loan repayment strongly indicates that the person is the borrower in substance as discussed above hri’s designation as borrower in the bridge loan agreement and execution of the agreement in its individual capacity as such obligated hri to repay the bridge loan this is consistent with both the mdfb’s and hri’s view of who the borrower was in the bridge loan transaction the mdfb’s top executive robert miserez and general counsel david queen credibly testified that the mdfb an unrelated third-party lender intended to make the bridge loan to hri not ghp and looked to hri not ghp for repayment likewise hri regarded the repayment of the bridge loan as its obligation according to the testimony of hri’s chief operating officer and president however even though a party is legally obligated to repay a loan it may not be the primary obligor if the lender is really looking to a secondary obligor for repayment see eg 778_f2d_769 11th cir 462_f2d_712 5th cir aff’g tcmemo_1970_182 this is not one of those cases the mdfb an unrelated third- party lender reviewed hri’s financial records and determined that hri had sufficient assets or potential assets to repay the bridge loan in the event of default moreover hri pledged its membership interest in wahd which included hri’s preferred_return and preferred_return of capital rights as collateral for repayment of the bridge loan but even if hri could not repay the bridge loan the record does not reflect that another party was obligated through guaranties side agreements or otherwise to repay hri’s obligation under the bridge loan in the event of default the mdfb could seek recourse for default only against hri accordingly this is not a case where the lender was in substance relying on a person secondarily we note certain hri partners made guaranties with respect to obligations under the bridge loan but their guaranties did not cover repayment of principal or interest under the bridge loan responsible for repayment see eg 778_f2d_769 462_f2d_712 respondent urges the court to use a bona_fide indebtedness analysis to determine whether hri was the borrower under the bridge loan see eg welch v commissioner f 3d pincite 135_tc_26 aff’d 691_f3d_1315 11th cir 88_tc_604 aff’d without published opinion 855_f2d_855 8th cir 54_tc_905 goldstein v commissioner tcmemo_1980_273 that analysis generally focuses on whether a transaction constitutes genuine indebtedness or something else eg a sale see eg welch v commissioner f 3d pincite there is no dispute between the parties that the bridge loan created indebtedness rather the parties disagree about the identity of the bridge loan borrower accordingly the bona_fide indebtedness analysis is not persuasive to us given the facts of this case respondent also argues that certain facts and circumstances surrounding the bridge loan show that ghp rather than hri was the borrower in substance in this regard respondent contends that hri failed to execute a promissory note with respect to the bridge loan hri did not reflect the bridge loan obligations on its financial statements or tax returns hri lacked sufficient creditworthiness for the mdfb to extend the bridge loan to it the bridge loan proceeds were transferred directly to ghp ghp paid interest on the bridge loan ghp was entitled to the remaining funds set_aside in an account to pay interest on the bridge loan and ghp paid certain bridge loan fees we recognize that courts have analyzed such factors in the s_corporation context when determining whether the loan obligor in substance is the entity or its owner see eg 456_f3d_645 6th cir aff’g tcmemo_2005_75 117_f3d_270 5th cir rev’g tcmemo_1995_326 112_f3d_1258 5th cir aff’g in part rev’g in part tcmemo_1995_572 902_f2d_439 5th cir we begin by noting that of the factors respondent relies on only the creditworthiness and the payment of interest and fees factors are probative of whether hri or ghp was primarily responsible for repaying the bridge loan and thus are the only ones that we believe are entitled to significant weight the record contradicts respondent’s claim that hri was not creditworthy for reasons already explaineddollar_figure see discussion supra p as for respondent’s claim that ghp made the dollar_figure prepayment of two years’ interest on the bridge loan we do not find this factor helpful under these circumstances the master indenture required that dollar_figure of the bridge loan proceeds deposited with the master trustee be immediately used to prepay the respective preferred returns owed to wahd and hri for their contributions of capital the prepaid preferred_return of dollar_figure was to be paid directly to the mdfb because the preferred_return rights were pledged and collaterally assigned to the mdfb under wahd collateral_assignment agreement and the hri collateral_assignment agreement i it follows then that for the dollar_figure prepaid_interest payment made to the mdfb to have been paid_by ghp we would have to disregard the preferred-equity return obligations of wahd and hri this would require us to assume in respondent’s favor the very question that we are analyzing is hri or ghp the borrower in substance likewise respondent’s argument that ghp was entitled to the remaining amounts in the interest deposit account suffers from the same problem this is because ghp would ultimately be owed any remaining amount in the prepaid_interest account for overpaying its preferred_return obligation unless we disregard the preferred_return obligations of ghp and wahd and assume ghp was the borrower accordingly we do not find that ghp’s transfer of a portion of the bridge loan proceeds that were used toward interest owed on the bridge loan or ghp’s entitlement to amounts remaining in the interest account show that ghp was the borrower as for the bridge loan fees the record reflects that ghp paid the loan fees out of its operating account the record also reflects that the mdfb sent the invoice for the bridge loan fees to hri indicating that the mdfb expected hri to pay the fee we think this factor supports respondent’s position but is not fatal to finding that hri was the true borrower in substance we find the remaining factors respondent cites insufficient to establish that hri was not the borrower in substance while it is true that hri failed to execute promissory notes we attach little significance to this failure a promissory note is not required to evidence indebtedness see burk v walton s w 2d mo kam inc v white s w 2d mo ct app reifeiss v barnes s w 2d mo ct app see also sandra schnitzer stern struct drafting com loan agr sec dollar_figure indeed a debt obligation may be evidenced by reference to the lender’s books_and_records see stern supra sec_1 we think hri’s execution of the bridge loan agreement itself was sufficient to evidence hri’s indebtedness to the mdfb for the bridge loan we also attach little significance to the mdfb’s transfer of the bridge loan proceeds directly to ghp we recognize some courts have found this factor to contribute to a finding that the recipient of the proceeds was the borrower in substance see eg 90_tc_206 aff’d without published opinion 875_f2d_420 4th cir salem v commissioner tcmemo_1998_63 aff’d 196_f3d_1260 11th cir reser v commissioner tcmemo_1995_572 these cases generally involved situations where the taxpayer and her s_corporation were co-obligors on the indebtedness or the taxpayer was claiming basis notwithstanding her status as a mere guarantor or surety nonetheless the disbursement and use of the loan proceeds by an entity controlled by the claimed borrower is not dispositive of the borrower’s identity in a loan transaction see 117_f3d_270 50_tc_762 miller v commissioner tcmemo_2006_125 gilday v commissioner tcmemo_1982_242 finally respondent points out that hri failed to reflect the bridge loan obligation on its financial statements or tax returns while this failure could indicate that hri did not view itself as the borrower under the bridge loan it does not change that the mdfb viewed hri as the borrower and as responsible for repayment of the bridge loan nor does it change that hri was in fact legally obligated to repay the bridge loan under the bridge loan agreement we do not find that hri’s omission of the bridge loan obligation on its financial statements or tax returns is fatal to concluding hri was in substance the bridge loan borrower in sum we recognize there were certain peculiarities surrounding the bridge loan transaction nevertheless we find that the totality of circumstances shows that hri and not ghp was in substance the bridge loan borrower ii the step_transaction_doctrine respondent argues that we should apply the step_transaction_doctrine to disregard the form of the bridge loan and recast ghp as the bridge loan borrower the step_transaction_doctrine is a variation of the substance_over_form_doctrine 88_tc_1415 under the step_transaction_doctrine a particular step in a transaction is disregarded for tax purposes if the taxpayer could have achieved its objective more directly but instead included the step for no other purpose than to avoid tax_liability 150_fedappx_40 2d cir citing 251_f3d_210 d c cir on the other hand the commissioner may not ‘generate events which never took place just so an additional tax_liability might be asserted ’ 490_f2d_241 2d cir quoting 361_f2d_972 ct_cl aff’g tcmemo_1972_98 courts generally apply one of three alternative tests in deciding whether to invoke the step-transaction doctrine and disregard a transaction’s intervening steps the binding_commitment_test the end result test and the interdependence test 137_tc_70 aff’d 728_f3d_676 7th cir the doctrine’s disregard or recharacterization of steps under any of the three tests is predicated on the steps’ being meaningless and done for the sole purpose of avoiding tax 111_tc_315 90_tc_171 aff’d without published opinion 886_f2d_1318 7th cir see also 630_f3d_1211 9th cir moreover the existence of an overall plan by itself does not justify the application of the step_transaction_doctrine turner broadcasting sys inc v commissioner t c pincite as a threshold matter the record does not reflect that the mdfb’s making the bridge loan to hri was a meaningless or unnecessary step taken for the sole purpose of avoiding federal_income_tax testimony at trial by the mdfb’s top executive established that on the basis of hri’s and ghp’s risk profiles the mdfb considered hri a more attractive borrower than ghp this point is not insignificant the favorableness of terms on which a borrower can obtain a loan is primarily based on the borrower’s creditworthiness accordingly hri should have been able to obtain the bridge loan on better terms than ghp we find that hri serving as the borrower in the bridge loan transaction was neither meaningless nor occasioned solely to avoid tax it follows that the successive capital contributions were also not meaningless and not arranged for the sole purpose of avoiding tax we hold that the step_transaction_doctrine is not relevant to the bridge loan transaction iii conclusion in conclusion participating partners established that hri was the bridge loan borrower in form and substance it follows the mdfb’s transfer of the bridge loan proceeds totaling dollar_figure directly to ghp constituted a deemed capital_contribution of them by hri to wahd and then a deemed capital_contribution of those proceeds by wahd to ghp see supra pp it further follows that ghp’s transfers of the lennox mhtcs and statler tranche mhtcs to hri as wahd’s assignee should be treated as partnership_distributions in redemption of wahd’s preferred equity rights unless they are otherwise properly recharacterized as taxable transfers whether ghp’s transfer of the relevant mhtcs should be recast as a taxable sale respondent argues that ghp’s transfers of the lennox mhtcs and the statler tranche mhtcs to wahd must be recast as taxable sales under the substance_over_form_doctrine the step_transaction_doctrine or alternatively under the disguised sale provisions of sec_707 we address each of these arguments in turn a respondent’s substance over form and step transaction arguments respondent argues that ghp disposed of the lennox mhtcs and the statler tranche mhtcs to firstar cdc for consideration used to pay the bridge loan ghp did not transfer the relevant mhtcs to firstar cdc rather hri transferred the lennox mhtcs and the statler tranche mhtcs to firstar cdc after receiving them as wahd’s assignee from ghp respondent argues however that ghp disposed of them to firstar cdc through a series of assignments by ghp wahd hri and the mdfb after careful consideration we found above that ghp did not assign the rights to the lennox and statler tranche mhtcs to wahd without these initial assignments respondent’s argument that the credits were in substance disposed of by ghp to firstar cdc through a series of assignments falls apart respondent also argues that ghp’s transfers of the relevant mhtcs should be recast as a taxable sale under the step_transaction_doctrine as previously explained the existence of an overall plan by itself does not justify the application of the step_transaction_doctrine turner broadcasting sys inc v commissioner t c pincite rather the doctrine is applied to combine a series of individually meaningless steps or steps lacking a business_purpose into a single transaction id the distributions of the lennox mhtcs and the statler tranche mhtcs were made pursuant to wahd’s preferred-equity rights those rights flowed from wahd’s deemed capital_contribution which was not a meaningless or unnecessary step in the transaction because a legitimate step created the rights we find that the step satisfying the rights also was legitimate accordingly we decline to alter the form of the transaction under the step_transaction_doctrine b respondent’s disguised sale argument respondent also argues that part of wahd’s transfer of the bridge loan proceeds to ghp and ghp’s transfer of the lennox mhtcs and statler tranche mhtcs to wahd taken together constitute a disguised sale under sec_707 of subchapter_k as a general_rule if a partner engages in a transaction with a partnership other than in his capacity as such the transaction shall be treated as occurring between the partnership and one who is not a partner sec_707 a non-partner-capacity transaction includes related transfers between a partner and a partnership that when viewed together are properly characterized as a sale_or_exchange of property sec_707 such a transaction is commonly referred to as a disguised sale sec_1_707-3 income_tax regs provides rules for identifying disguised sales that section however by its terms applies to situations where a partner transferred property to a partnership in exchange for money or other_property wahd transferred money rather than property to ghp and received property ie the lennox mhtcs and the statler tranche mhtcs instead of money from ghp in a subsequent transfer sec_1_707-6 income_tax regs instructs that rules similar to those provided in sec_1_707-3 income_tax regs apply to determine whether a transfer of property by a partnership to a partner and a transfer of money or other consideration by a partner to a partnership are treated as a disguised sale accordingly we apply similar rules to those in sec_1_707-3 income_tax regs to determine whether the transfers between wahd and ghp constitute a disguised sale we now turn to the relevant rules sec_1_707-3 income_tax regs instructs that a disguised sale occurs if on the basis of all the facts and circumstances two conditions are met the partnership would not have transferred money or property to the partner but for the transfer of money or property to the partnership and in cases of transfers that are not simultaneous the subsequent transfer is not dependent on the entrepreneurial risks of the partnership operations two rebuttable presumptions apply to nonsimultaneous transfers first transfers occurring more than two years apart are presumed not to constitute a disguised sale unless the facts and circumstances clearly establish that the transaction is a disguised sale sec_1_707-3 income_tax regs second transfers occurring within two years are presumed to be a sale unless the facts and circumstances clearly establish otherwise sec_1_707-3 income_tax regs wahd’s deemed transfer of the bridge loan proceeds to ghp occurred on date a distribution of the lennox mhtcs occurred in date the distribution of the statler tranche mhtcs occurred on date more than two years after wahd made the wahd contribution to ghp accordingly there is a rebuttable_presumption that the lennox mhtc distribution was a disguised sale and that the statler tranche mhtc distribution was not a disguised sale with these presumptions in mind we evaluate whether the facts and circumstances show that the relevant transactions constitute a disguised sale sec_1_707-3 income_tax regs provides a nonexhaustive list of factors taken into account on the earliest of the two transfers that may tend to prove the existence of a disguised sale those factors include the timing and amount of the subsequent transfer is reasonably determinable at the time of the earlier transfer the transferor has a legally enforceable right to the subsequent transfer the partner’s right to receive the subsequent transfer is secured other persons have made or are legally obligated to make a contribution to the partnership to permit it to make the subsequent transfer other persons have loaned or agreed to loan to the partnership the money or other consideration required to make the subsequent transfer taking into account whether any obligations to lend are subject_to contingencies of the partnership operation the partnership incurs or is required to incur debt to provide the property to make the subsequent transfer taking into account the ability of the partnership to incur said debt the partnership has assets beyond the needs of its business which are available to make the subsequent transfer the partnership_distributions allocations or control of partnership operations are designed to effect an exchange of the burdens and benefits of ownership of property the partnership_distributions to the partner are disproportionately large in relation to the partner’s general and continuing interest in partnership profits and the partner has no obligation to repay to the partnership the property transferred or such obligation is so distant in time that its value is small in relation to the property transferred to the other partner sec_1_707-3 income_tax regs sec_1_707-3 example income_tax regs also indicates that these factors may disprove the existence of a sale we now evaluate the enumerated factors to determine whether the transfers at issue are properly characterized as a disguised sale the first factor considers whether the timing and amount of a subsequent transfer are determinable with reasonable certainty at the time of an earlier transfer sec_1_707-3 income_tax regs when wahd made the wahd contribution to ghp ghp did not promise to pay any amount of mhtcs at any time to wahd the ghp amended operating_agreement entitled wahd to a preferred_return of capital upon the occurrence of an extraordinary event which the agreement defined as the creation of new property e g the issuance of mhtcs to ghp that return was to be a distribution of available cashflow or alternatively in the sole discretion of hh a distribution_of_property having an agreed fair_market_value equal to wahd’s capital_contribution of the bridge loan proceeds accordingly even if an extraordinary event occurred the amount and timing of any subsequent transfer of mhtcs were uncertain because hh could choose to have ghp sell the credits and satisfy the preferred_return of capital obligation from ghp’s available cashflow hh’s discretion to determine whether ghp would use property or available cashflow to satisfy wahd’s preferred_return of capital right was more than a trivial right the record reflects that the discretionary right was valuable to kc in this regard kc’s vice president of tax testified that around the time of the hotel project kc was considering certain tax planning to use losses including capital losses from its foreign operations he further testified that there was a good possibility that gain from selling mhtcs at the ghp level could have been used by kc to offset excess capital losses or capital_loss carryovers that might otherwise expire unused under such circumstances of the gain from the relevant sales of mhtcs would have flowed through to kc without any_tax paid on the allocation of gain providing the company with additional basis in its ghp membership interest equal to the amount of gain thereby reducing its gain on a subsequent disposition dollar_figure the amount and timing of any subsequent distribution from available cashflow was also uncertain ghp’s available cashflow equaled its cash receipts reduced by its cash expenses for a given fiscal period accordingly ghp could not make the preferred_return of capital distribution to wahd to the extent it had an operating deficit for a fiscal period whether ghp would incur an operating deficit depended on ghp’s operations that ghp would incur an operating deficit was not an insignificant risk given the complexity and scale of the hotel project indeed such risk materialized during the hotel project moreover even if ghp had available cashflow its ability to distribute it as a preferred_return of capital was limited ghp’s cash receipts included proceeds ghp obtained from various financings to fund the hotel project the master indenture placed restrictions on the use of the proceeds and the priorities of payments from the proceeds thus restricting ghp’s ability to distribute available if ghp sold the credits hh would be entitled to of the income from the sale and be required to pick up of the gain cashflow accordingly we find that the amount of any preferred_return of capital to wahd whether in the form of mhtcs or cash was not determinable with reasonable certainty respondent argues that the first factor weighs in favor of finding a disguised sale because the amount and timing of the mhtcs generated by the hotel project could be determined with reasonable certainty we have doubts about whether the mhtcs the hotel project would generate could be determined with reasonable certainty given the significant business economic and legal risks associated with a complex real_estate development project such as the hotel project moreover even if the parties could have determined with reasonable certainty the timing and amount of mhtcs the hotel project would generate the we also note that under missouri law wahd was treated as an equity holder see mo ann stat sec west consequently ghp was prohibited from making any distribution to wahd to the extent it would i prevent it from paying its obligations as they became due or ii the distribution would render ghp insolvent see id sec for example with respect to the timing of the mhtcs the project completion date could have been significantly extended by a variety of factors including labor strife latent conditions weather events or the mismanagement of the project the amount of the mhtcs generated by the hotel project could have been less than expected if the hotel project was completed under budget given the mhtcs generated by the hotel project were a function of eligible expenses and legislative action by the state of missouri could have reduced or eliminated the value of the mhtcs at a time when wahd’s preferred equity remained at risk amount and timing of the transfer of any mhtcs to wahd still remained uncertain because of hh’s discretionary right to decide whether ghp would satisfy wahd’s preferred equity right with mhtcs or available cashflow we find that the first factor weighs against disguised sale treatment the second factor considers whether the transferor had a legally enforceable right to the subsequent transfer sec_1_707-3 income_tax regs as we previously found hh had unrestricted discretion to satisfy wahd’s preferred_return of capital right by distributing available cashflow as allowed under the master indenture or alternatively by distributing property having a fair_market_value equal to wahd’s capital_contribution accordingly wahd did not have a legally enforceable right to the mhtcs this factor weighs against disguised sale treatment the third factor is whether the partner’s right to receive the transfer of money or other consideration is secured in any manner taking into account the period during which it is secured sec_1_707-3 income_tax regs respondent argues that this factor is met because hh waived its discretion to make the distribution of the mhtcs to wahd under the ghp amended operating_agreement thus ensuring that the mhtcs once generated would be distributed to wahd as previously explained hh did not waive its discretion to distribute the mhtcs as a preferred_return of capital to wahd accordingly respondent’s argument fails additionally the record does not otherwise reflect that wahd’s potential right to a preferred_return of capital was secured_by ghp’s assets or otherwise this factor weighs against disguised sale treatment under the fourth factor we consider whether any person has made or is legally obligated to make contributions to the partnership to allow the partnership to make the transfer of money or other consideration sec_1_707-3 income_tax regs respondent argues that the insurance_company that provided insurance coverage against the nonreceipt of mhtcs was obligated to make a contribution so that ghp could make the preferred_return of capital to ghp we understand the term contribution under the fourth factor to mean the transfer of property or money that gives the transferor some equity_interest in the partnership the insurance_company agreed to insure against ghp’s non-receipt of the mhtcs in consideration for insurance premiums_paid by ghp hence ghp insured against the nonreceipt of the mhtcs we do not view this as securing wahd’s right to receive the preferred_return of capital because wahd did not have a direct or sole interest in the insurance proceeds thus proceeds could be used to satisfy ghp’s obligations including claims of third- party creditors that is we understand secured in the traditional sense as providing an interest in property ghp’s receipt of the insurance proceeds would not give the insurance_company an equity_interest in ghp accordingly ghp’s argument that the insurance coverage shows a third party was obligated to make a contribution to ghp to permit ghp to make the preferred_return of capital distribution to wahd lacks meritdollar_figure the record does not otherwise reflect that any person contributed or was obligated to make a contribution to ghp to allow it to make a preferred_return of capital distribution to wahd we find this factor weighs against disguised sale treatment under the fifth and sixth factors we consider whether a third party or the partnership has incurred debt or is obligated to incur debt to enable the partnership to make the second transfer sec_1_707-3 and vi income_tax regs we note that even if ghp’s receipt of the insurance proceeds constituted a contribution the record does not reflect that that contribution would have been made to permit ghp to satisfy wahd’s preferred_return of capital right that is while the receipt of the insurance proceeds would have increased ghp’s cash receipts the record does not reflect that the insurance coverage was maintained for the specific purpose of allowing ghp to satisfy wahd’s preferred_return of capital right nor does the record reflect that the proceeds would necessarily be used for that purpose as previously discussed a cash distribution to satisfy wahd’s preferred_return of capital right could only be made from ghp’s available cashflow and then only if the master indenture permitted the distribution the proceeds then could have been used to satisfy ghp’s operating_expenses or other obligations that took priority under the master indenture the record does not reflect the incurring or obligation to incur such debt by a third party or ghp this factor weighs against finding that a disguised sale occurred the seventh factor is whether the partnership has excess liquid_assets that it can use to make the subsequent transfer sec_1_707-3 vii income_tax regs respondent does not address this factor in his analysis we note however that ghp did not have excess liquid_assets to allow it to make the distribution to wahd in fact ghp had no liquid_assets until the moment the mhtcs were issued to it all of ghp’s property was held by the master trustee and pledged to the master trustee to service ghp indebtedness incurred in connection with the hotel project under the eighth factor we consider whether the partnership_distributions allocation or control of partnership operations is designed to effect an exchange of the burdens and benefits of ownership of property sec_1_707-3 income_tax regs respondent contends that the ghp amended operating_agreement and hh’s intervention in the wahd collateral_assignment agreement transferred to wahd all rights to ghp’s expected mhtcs from the hotel project respondent contends that this purported transfer was designed to effect an exchange of the burdens and benefits of ownership of the mhtcs again we disagree that the relevant agreements transferred the ownership rights of the expected mhtcs to wahd consequently respondent’s argument fails we find this factor weighs against disguised sale treatment the ninth factor is whether the transfer of money or property by the partnership to the partner is disproportionately large in relation to the partner’s interest in partnership profits sec_1_707-3 income_tax regs wahd had a interest in the profits and losses of ghp and received of the mhtcs accordingly the transfer of the mhtcs did not bear any relationship to wahd’s general and continuing interest in ghp profits this factor points toward disguised sale treatment finally we consider whether the partner has no obligation to return or repay the subsequent distribution to the partnership sec_1_707-3 income_tax regs neither the ghp amended operating_agreement nor any other agreement obligated wahd to return or repay ghp for the lennox mhtcs and the statler tranche mhtcs when it made the deemed transfer of the bridge loan proceeds to ghp accordingly wahd received those mhtcs unencumbered participating partners contend that wahd was required to fund certain ghp operating deficits and in fact did fund ghp operating deficits during participating partners conclude on these facts that wahd was obligated to repay a substantial portion of the value of the mhtcs it received we are not persuaded under this factor we focus on obligations arising from the subsequent transfer not general_partnership obligations that a partner has independent of the transfer such as wahd’s obligation to fund certain operating deficits this factor weighs in favor of finding a disguised sale occurred on balance of the factors support disguised sale treatment the remaining factors weigh against such treatment the weight to be given to each of the factors depends on the particular case sec_1_707-3 income_tax regs in this case we find the first and second factors most compelling in our evaluation of the first factor we determined that the timing and amount of any distribution of mhtcs or their economic equivalent by ghp to wahd was uncertain and applying the second factor we concluded that wahd never had a legal right to any mhtcs ghp earned these factors strongly indicate that wahd’s preferred-equity contribution was subject_to the entrepreneurial risk of ghp’s partnership operations upon our evaluation of all the factors we decline to recharacterize ghp’s transfers of the lennox and statler tranche mhtcs as a disguised sale participating partners argue that if they did constitute a disguised sale the gain from the sale would have been reportable for a closed_year because wahd’s deemed transfer of the bridge loan proceeds to ghp constituted an advance_payment we agree the disguised sale is considered to occur when under general principles of federal tax law the partnership is considered the owner of the property sec_1_707-3 income_tax regs advance_payments however for goods or services are generally taxable in the year of receipt 372_us_128 am auto ass’n v united_states 367_us_687 auto club of mich v commissioner u s big_number see also sec_1_451-1 income_tax regs cf 493_us_203 n the receipt of money generally constitutes an advance_payment where the taxpayer has the unconditional right to keep the money so long as the taxpayer fulfills his or her side of the bargain cf commissioner v indianapolis power light co u s pincite assuming ghp’s transfers of the lennox mhtcs and the statler tranche mhtcs constituted a disguised sale part of wahd’s deemed capital_contribution of the bridge loan proceeds to ghp in constituted the purchase_price for the mhtcs hence wahd’s capital_contribution was ghp’s to keep so long as it transferred the purchased credits accordingly wahd’s capital_contribution to ghp was an advance_payment made in and thus was includible in ghp’s income in a prior year not before this court respondent argues that the participating partners’ argument lacks merit because the deemed transfer of the bridge loan proceeds by wahd to ghp was a loan which was satisfied by the transfer of mhtcs in or a deposit for the future sale of mhtcs consequently respondent concludes that disguised sale income from the relevant transfers would be reportable in respondent’s argument is untenable on its face if we assume a disguised sale occurred as respondent contends then part of wahd’s deemed transfer of the bridge loan proceeds to ghp necessarily constituted consideration for the purchase of the lennox mhtcs and the statler tranche mhtcs and therefore could not have been a loan or a deposit respondent also argues that the duty-of-consistency doctrine bars ghp from taking the position that is the correct_tax year for reporting income attributable to a disguised sale of the lennox mhtcs and the statler tranche mhtcs the duty-of-consistency doctrine precludes a taxpayer from taking one position one year and a contrary position in a later year after the limitations_period has run for the first year 854_f2d_755 5th cir aff’g 87_tc_1087 we do not believe the duty-of-consistency doctrine is applicable because ghp has not changed its position ghp maintained on its returns and throughout this case that it did not sell the lennox mhtcs or the statler tranche mhtcs moreover despite respondent’s assertion to the contrary ghp’s taking the position that any income attributable to a disguised sale is includible in does not constitute a change_of position that is we think ghp’s taking a position about the legal effects flowing from the court’s rejecting its primary position and sustaining respondent’s position does not constitute a change_of position for purposes of the duty-of-consistency doctrine conclusion we found wahd made a deemed capital_contribution of the bridge loan proceeds to ghp entitling it to a preferred_return of capital and could receive cash or property including mhtcs in redemption of its preferred equity we found unpersuasive respondent’s argument that ghp’s transfer of the lennox mhtcs and the statler tranche mhtcs should be recast as a taxable sale under the substance_over_form_doctrine step_transaction_doctrine or the disguised sale rules for these reasons we agree with participating partners that ghp’s transfers of the lennox mhtcs and the statler tranche mhtcs to hri as wahd’s assignee are properly characterized as partnership_distributions consequently under sec_731 ghp was not required to recognize any gain_or_loss on those distributions b the statler tranche mhtcs we now address the treatment of ghp’s transfer of the statler tranche mhtcs participating partners contend that ghp sold dollar_figure of the statler tranche mhtcs to firstar cdc and distributed the remaining dollar_figure to hri as wahd’s assignee respondent argues that ghp sold all the statler tranche mhtcs to firstar cdc and therefore must include all the proceeds from that sale in income we agree with respondent participating partners argue that the form of the date transfer controls the transaction’s character ghp transferred all of the statler tranche mhtcs to firstar cdc on date on date ghp asked the mded to amend its transfer records to reflect that a portion of the statler tranche mhtcs transfer represented a distribution to hri we find that the date transfer controls our analysis of the transaction while ghp attempted to rescind the initial date transfer of the statler tranche mhtcs rescission must occur in the same tax_year as the initial transaction if the initial transaction is to be disregarded for tax purposes see revrul_80_58 1980_1_cb_181 ghp did not attempt to rescind the initial transfer until after it sec_2002 tax_year accordingly the rescission attempt was ineffective the date transfer constituted a sale of the full amount of the statler tranche mhtcs and ghp must include all of the proceeds in income without citing any authority participating partners suggest that we should ignore the initial date transfer of the statler tranche mhtcs because the mded made a mistake in making the transfer ie the transfer was not intended on this point participating partners contend that ghp intended to request that the mded transfer mhtcs with a fair_market_value of dollar_figure to hri and any mhtcs in excess of that amount to firstar cdc through the date cover letters accompanying the missouri forms htc-t also dated date they argue that the mded misinterpreted the transfer request instructions in those cover letters which hri sent to the mded on ghp’s behalf as a result they contend the mded transferred mhtcs with a credit value of dollar_figure to hri instead of fair_market_value of that amount as of date the exact amount of mhtcs that would be generated by the statler project was uncertain and it did not become certain until date apparently as a result of this ghp left blank the amount of mhtcs to be transferred to firstar cdc on the missouri form htc-t dated date it requested however that the mded fill in the blank with the amount of mhtcs exceeding the the first dollar_figure of the awarded credits once the amount of mhtcs generated by the statler project was finalized causing more mhtcs than they intended to be transferred directly to firstar cdc they claim the transfer request instructions in the cover letter were misinterpreted because they were vague we are not persuaded the cover letters are arguably vague as to whether mhtcs with a credit value or fair_market_value of dollar_figure are to be transferred to hri and consequently the amount of excess mhtcs that are to be transferred to firstar cdc however the accompanying missouri forms htc-t dated date and executed by ghp and hri provide important context regarding the meaning and intent of the cover letter instructions and more generally ghp’s intent to make the statler tranche mhtcs transfer in the missouri forms htc- t dated date ghp and hri both reference the credit value of the relevant mhtcs to be transferred as dollar_figure and acknowledge that those credits were to be sold at dollar_figure cents per credit for a total of approximately dollar_figure million ie the mhtcs fair_market_value this undercuts participating partners’ contention that the mded misinterpreted the cover letter instructions and that ghp did not intend to transfer mhtcs with a credit value of dollar_figure to hri and consequently did not intend to transfer the excess statler mhtcs having a credit value of dollar_figure ie the statler tranche mhtcs to firstar cdc on the basis of our review of the cover letters and the missouri forms htc-t we are not convinced that the statler tranche mhtcs transfer was unintended it follows that ghp has also failed to prove that the statler tranche mhtcs transfer was unintentional because the amount of mhtcs from the statler project that ghp intended to transfer to firstar cdc depended on the amount of the statler mhtcs that it instructed the mded to transfer to hri accordingly we will not disregard the statler tranche mhtcs transfer we thus now consider the tax consequences of the statler tranche mhtcs transfer in that transfer ghp sold all of the statler tranche mhtcs to firstar cdc firstar cdc transferred dollar_figure of the proceeds directly to ghp ghp does not dispute that these proceeds are includible in income the remainder of the sale proceeds were transferred to the mdfb which applied them against hri’s bridge loan liability that ghp did not actually receive the proceeds does not allow it to avoid having to take the proceeds into income sec_61 provides in part that gross_income means all income from whatever source derived it is fundamental to our system of taxation that income must be taxed to the one who earns it see 337_us_733 the incidents of taxation cannot be avoided through an anticipatory_assignment_of_income see 410_us_441 281_us_111 a taxpayer realizes income if he controls the disposition of that which he could have received himself but diverts to another as a means of procuring the satisfaction of his goals the receipt of income by the other party under such circumstances is merely the fruition of the taxpayer’s economic gain see 333_us_591 311_us_112 ghp could have received all of the proceeds from the statler tranche mhtcs sale but chose if not directly then tacitly to divert a certain amount of the proceeds to the mdfb for use against hri’s bridge loan liability accordingly under the assignment-of-income doctrine those proceeds are includible in ghp’s income we note that participating partner’s alternative argument that any unreported income from the sale of mhtcs is includible for a closed_year does not apply to ghp’s income from the statler tranche mhtcs transfer that argument is predicated on wahd’s capital_contribution in having been treated under the disguised sale rules as a payment to ghp for the mhtcs it subsequently transferred to wahd in the sale of the statler tranche mhtcs was to firstar cdc not wahd moreover firstar cdc did not make any payment to ghp in rather it made payments to ghp directly and indirectly in accordingly firstar cdc did not make any advance_payment in a closed_year to ghp as contemplated under participating partner’s alternative argument for excluding income from the sale of mhtcs for iii treatment of the developer fee the next issue we address is whether ghp must include in income the dollar_figure transferred to it from the deferred developer fees fund the transfer occurred in date when ghp had an operating deficit and before the commencement-of-operations date had been reached the ghp amended operating_agreement treats the transfer as a deemed payment by wahd to ghp in satisfaction of its obligation to fund certain ghp operating deficits but the ghp amended operating_agreement instructs that the deemed payment shall not be treated as a loan or capital_contribution to ghp by wahd and shall not affect wahd’s membership interest or allocation of profits or losses respondent argues that because the ghp amended operating_agreement treats the transfer as a payment from wahd and ghp received the transfer with no corresponding obligation to wahd ghp had an accession to wealth and the receipt of funds constitutes income see sec_61 participating partners argue that the transfer is properly characterized as a capital_contribution and is therefore excludible from ghp’s income both respondent’s argument and participating partners’ argument assume that wahd made the transfer or payment of the dollar_figure amount from the deferred developer fees fund to ghp we find that assumption is incorrect and therefore disagree with both respondent’s and participating partners’ characterization of the transfer ghp transferred money to the deferred-development-fees fund including the dollar_figure transferred from the fund to ghp the money in the deferred- development-fees fund was held by the master trustee in trust and was to be applied in accordance with the master indenture both wahd and ghp had certain rights to money in the deferred-development-fees fund after ghp transferred it before the commencement-of-operations date ghp had the right to use any unpaid money to fund its operating deficits and had no obligation to repay any amounts withdrawn wahd had a right to three installments of the development fee if certain construction and financial targets were met the first installment from the deferred-development-fees fund was to be paid upon the completion of the rehabilitation of the lennox hotel the second upon the commencement-of- operations date and the final upon a certain debt service coverage ratio for one full year after the commencement-of-operations date if the relevant achievements occurred the amount of the second and third installments depended on the amount of funds available in the deferred-development-fees fund on the achievement dates accordingly ghp’s use of money in the deferred-development-fees fund could reduce the amount of the second and third installments with these rights in mind we turn to the characterization of the transfer of the dollar_figure from the deferred-development-fees fund to ghp while the ghp amended operating_agreement characterizes the transfer as a deemed payment from wahd to ghp the incidence of taxation must turn on the transaction’s substance commissioner v court holding co u s pincite because the dollar_figure was transferred to ghp before the commencement-of- operations date ghp had the right to use the money in the deferred-development- fees fund to fund its operating deficits with no obligation to return the money wahd on the other hand had not earned the dollar_figure transferred to ghp accordingly wahd had no right to the amount once used by ghp as the transfer was before the commencement-of-operations date and the transfer reduced the amount of any potential second installment hence ghp never relinquished its beneficial_ownership of the dollar_figure from the time it transferred the money into the deferred-development-fees fund until it was returned to ghp the transfer of for example if there was less than dollar_figure upon the commencement- of-operations date the amount of the second installment would be zero and if one year after the commencement-of-operations date there were no funds in the deferred-development-fees account the amount of the third installment would be zero the dollar_figure from the deferred-development-fees fund to ghp then was in substance a return of principal and is not taxable_income to ghp iv accuracy-related_penalty respondent contends that ghp is liable for a accuracy-related_penalty for under sec_6662 and b on any underpayment resulting from ghp’s omitting the statler tranche mhtcs sale income because the underpayment was due to negligence or disregard of rules or regulations negligence is defined as any failure to make a reasonable attempt to comply with the code or to exercise ordinary and reasonable care in the preparation of a tax_return sec_1_6662-3 income_tax regs a return position that has a reasonable basis is not attributable to negligence id the term disregard is defined as any careless reckless or intentional disregard disregard of rules or regulations is careless if the taxpayer does not exercise reasonable diligence to determine the correctness of a tax_return position that is contrary to rules or regulations sec_1_6662-3 income_tax regs ghp transferred the statler tranche mhtcs to firstar cdc in exchange for consideration during it sec_2002 tax_year it later attempted to unwind that transfer as we previously held ghp failed to establish that the initial transfer of the statler tranche mhtcs to firstar cdc should be disregarded for federal tax purposes considering all the facts we believe ghp lacked a reasonable basis to believe the initial transfer was ineffective accordingly we find that its failure to report part of the income from that sale was negligent or at least a careless disregard of the relevant rules or regulations thus respondent has made a prima facie case for imposing the penalty the sec_6662 accuracy-related_penalty does not apply to any portion of the underpayment as to which the taxpayers establish that they acted with reasonable_cause and in good_faith see sec_6664 115_tc_43 aff’d f 3d 3d cir the decision as to whether the taxpayer acted with reasonable_cause and in good_faith depends upon all the pertinent facts and circumstances including the taxpayer’s efforts to assess his proper tax_liability the taxpayer’s knowledge and experience and the reliance on the advice of a professional see sec_1 b income_tax regs for a taxpayer to reasonably rely on the advice of a professional so as to possibly negate a sec_6662 accuracy-related_penalty the taxpayer must prove by a preponderance_of_the_evidence that he meets each requirement of the following three-prong test the adviser was a competent professional who had sufficient expertise to justify reliance the taxpayer provided necessary and accurate information to the adviser and the taxpayer actually relied in good_faith on the adviser’s judgment neonatology assocs p a v commissioner t c pincite participating partners argue that the reasonable_cause and good_faith defense applies here because they relied on the baker mckenzie tax opinion in omitting the relevant portion of income from the sale of the statler tranche mhtcs we disagree the baker mckenzie tax opinion addresses the treatment of anticipated distributions of mhtcs from ghp to wahd the opinion was provided to ghp two years before the statler tranche mhtcs were transferred to firstar cdc it does not opine on or even mention the tax treatment including the effectiveness of the initial date transfer of the statler tranche mhtcs to firstar cdc put another way the opinion does not analyze the transaction resulting in the underpayment it follows that ghp could not have relied in good_faith on the baker mckenzie tax opinion in omitting income from its sale of the statler tranche mhtcs to firstar cdc consequently we find that participating partners have failed to show ghp reasonably relied on professional advice or acted with reasonable_cause or in good_faith in taking the position resulting in the underpayment accordingly we sustain the accuracy-related_penalty on the portion of the underpayment due to ghp’s failure to report income from its sale of the statler tranche mhtcs to firstar cdc we have considered all remaining arguments the parties have made and to the extent not addressed we find them to be irrelevant moot or meritless to reflect the foregoing decision will be entered under rule