Opinion ID: 419666
Heading Depth: 3
Heading Rank: 2

Heading: Purpose and Intent Requirement

Text: 37 A further basis for affirming the denial of Consolidated's section 461(f) deduction is that the purpose of Consolidated's transfers of money to Seaboard under its agreement with Seaboard was to protect Seaboard, not to provide for the satisfaction of the asserted liability, as section 461(f) demands. Consolidated asserts that it is improper to look at the purpose and intent of the parties. Also it argues that inasmuch as Seaboard was contractually obligated to pay a claimant had Consolidated not done so, the transfers, in effect, were intended to provide for the satisfaction of Consolidated's contested liabilities. 13 38 Section 461(f)(2) makes it clear that an examination of the purpose and intent of the taxpayer is necessary to determine whether the requirements for deductibility have been met. For the transfer to be deductible, it must have been made to provide for the satisfaction of the asserted liability. 14 Any other reason for the transfer fails to satisfy the statute. See Specialized Services, Inc. v. Commissioner, 77 T.C. 490, 506-07 (1981). Moreover, Seaboard's contractual obligation to pay claimants upon Consolidated's default changes nothing. As the Tax Court found, the parties did not intend the transferred money to be used to pay a single claim. 74 T.C. at 804. It was to provide security for Seaboard and not to satisfy Consolidated's contested liabilities. 39 AFFIRMED IN PART, REVERSED IN PART.