Court Opinion

ID: 4481264
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:48.083088+00
Date Added: 2024-06-11T14:54:00.501036
License: Public Domain

Simpson, J., concurring: I agree with the results of the majority opinion, but my reasons are somewhat different. Occasionally, the tax consequences of a transaction are governed by the form in which it is cast. Commissioner v. Lester, 366 U.S. 299 (1961); Chester L. Tinsman, 47 T.C. 560 (1967). However, generally, tax consequences turn upon substance. Taxpayers.are not permitted to circumvent the restrictions in the law by mere formal compliance; nor should they be deprived of a tax benefit when in substance they are entitled to it merely because they accidentally or unwisely chose the wrong form. If tax consequences were based upon form, the results would be a capricious application of the tax law. Relying upon substance results in a more equitable application of the law. In my opinion, the substance of the transactions in this case is that the petitioners exchanged business property which they desired to relinquish for other business property which they wished to operate. I see no reason for reading the statute restrictively and limiting it to a bilateral exchange of properties. The petitioners desired to transfer their property and found a purchaser who wished to acquire it. However, the purchaser owned no property suitable for an exchange and did not wish to take title 'to any such property merely for the purpose of trading it. Thus, the petitioners paid their attorneys to find other property which they could accept in exchange, and the attorneys effected the necessary exchanges. In summary, the petitioners were the moving force; it was through their planning and efforts that the exchanges were arranged. In my view, it should make no difference whether the traded property was first transferred to the. agents of S. P. so that S. P.’s agents could effect a bilateral exchange with the petitioners. To hold that section 1031 applies when the traded property is first transferred to S. P. or their agent, but not otherwise, places a premium on formal compliance with the law. So long as the ultimate effect of the several exchanges of property is that the petitioners have transferred business property and acquired like business property, I believe section 1031 should apply. If the petitioners had sustained a loss as a result of the transactions and were arguing that it should be recognized, I would not be beguiled by all that took place in this case; I would hold that the step transac-. tion doctrine should be applied, that in substance there was an exchange of business property for business property, and that the loss is not allowable. In my judgment, an even-handed application of the law calls for us also to apply the step-transaction doctrine when the taxpayer realizes a gain.