Court Opinion

ID: 4474085
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:10:45.191804+00
Date Added: 2024-06-11T15:04:26.604052
License: Public Domain

Wells, C.J., concurring: Respectfully, although I concur in the result reached by the majority in the instant case, I wish to express my disagreement with the majority’s application of the economic substance doctrine. The majority rejects the alleged business purposes underlying the formation of the disputed partnership but then concludes that the partnership “had sufficient substance to be recognized for tax purposes”, majority op. pp. 486-487, because the partnership was validly formed under State law, which altered the legal relationships between the decedent and others. I believe that the majority’s stated reasons for holding that the partnership had substance misapply the economic substance doctrine. In cases such as ACM Partnership v. Commissioner, 157 F.3d 231 (3d Cir. 1998), affg. in part and revg. in part on another issue T.C. Memo. 1997-115, where the economic substance doctrine is applied to deny income tax benefits, the doctrine is applied regardless of the validity of the partnership under State law. Because the majority has rejected the alleged business purposes underlying the formation of the partnership in issue in the instant case, a proper application of the economic substance doctrine, if it were to apply, would ignore the partnership and disallow the discounts for minority interest and lack of marketability. I believe that, rather than holding that the economic substance doctrine is satisfied in the instant case, the Court should conclude that the economic substance doctrine does not apply to disregard a validly formed entity where the issue is the value for Federal gift and estate tax purposes of the interest transferred in that entity. In that regard, I agree with Judge Foley’s concurring opinion in Knight v. Commissioner, 115 T.C. 506, 520 (2000). Foley, J., agrees with this concurring opinion.