Opinion ID: 614511
Heading Depth: 2
Heading Rank: 1

Heading: The transaction should be recharacterized as a sale.

Text: Where, as here, we confront taxpayers who have taken a circuitous route to reach an end more easily accessible by a straightforward path, we look to substance over form and tax the transactions for what realistically they are. [76] A court is not bound to accept a taxpayer's formal characterization of a transaction, even a transaction that has economic reality and substance. [77] `The major purpose of the substance-over-form doctrine is to recharacterize transactions in accordance with their true nature.' [78] Because we have concluded that the acquisition of the NPLs had economic substance but that the formal partnership structure through which that acquisition took place was a sham, we are left to determine what transactional form most neatly maps onto the substance of that acquisition. The outcome of our analysis under the substance-over-form doctrine is dictated by the outcomes of our economic-substance and sham-partnership analyses. [79] Beal paid Cinda $19.4 million in exchange for an interest in a portfolio of NPLs. That interest was not properly classified as a partnership interest. It is most naturally classified as an ownership interest. We hold that Southgate's acquisition of the portfolio of NPLs should be recharacterized as a direct sale of those NPLs by Cinda to Beal. [80]