Court Opinion

ID: 9841131
Source: CourtListenerOpinion
Date Created: 2023-09-21 15:01:11.475133+00
Date Added: 2024-06-11T08:39:42.067913
License: Public Domain

Case: 21-2353    Document: 52    Page: 1   Filed: 09/21/2023

   United States Court of Appeals
       for the Federal Circuit
                  ______________________

           GSS HOLDINGS (LIBERTY) INC.,
                 Plaintiff-Appellant

                            v.

                    UNITED STATES,
                    Defendant-Appellee
                  ______________________

                        2021-2353
                  ______________________

     Appeal from the United States Court of Federal Claims
 in No. 1:19-cv-00728-EGB, Senior Judge Eric G. Bruggink.
                  ______________________

                Decided: September 21, 2023
                  ______________________

     ANDREW JOHN PINCUS, Mayer Brown LLP, Washing-
 ton, DC, argued for plaintiff-appellant. Also represented
 by SAMANTHA BEAR, TIMOTHY S. BISHOP, Chicago, IL;
 GEOFFREY M. COLLINS, BRIAN WRIGHT KITTLE, New York,
 NY.

    SHERRA TINYI WONG, Tax Division, Appellate Section,
 United States Department of Justice, Washington, DC, ar-
 gued for defendant-appellee. Also represented by JACOB
 EARL CHRISTENSEN, DAVID A. HUBBERT.
                 ______________________
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 2                           GSS HOLDINGS (LIBERTY) INC. v. US

     Before NEWMAN, REYNA, and CUNNINGHAM, Circuit
                       Judges.
 Opinion for the court filed by Circuit Judge CUNNINGHAM.
     Dissenting opinion filed by Circuit Judge NEWMAN.
 CUNNINGHAM, Circuit Judge.
      GSS Holdings (Liberty) Inc. (“GSS”) appeals from a de-
 cision of the United States Court of Federal Claims
 (“Claims Court”) granting summary judgment in favor of
 the government and denying summary judgment in favor
 of GSS with respect to GSS’s 2011 deduction claim for a
 federal tax refund or credit for the tax year ending on De-
 cember 31, 2009. GSS Holdings (Liberty) Inc. v. United
 States, 154 Fed. Cl. 481 (2021) (“Decision”). Because we
 conclude that the Claims Court erred by applying an incor-
 rect legal standard to reach its decision, we vacate the judg-
 ment and remand for a determination under the correct
 legal standard.
                       I. BACKGROUND
     GSS serves as the managing member and owner of Lib-
 erty Street Funding LLC (“Liberty Street”). 1 See J.A. 17
 ¶ 9; J.A. 1423, 1431. In September 2006, Liberty Street
 purchased a note issued by Aaardvark IV Funding Limited
 (the “Aaardvark Note”) and entered into a liquidity asset
 purchase agreement (“LAPA”) for the Aaardvark Note (the
 “Aaardvark LAPA”). See J.A. 619–52, 1046–77; Decision at
 484 n.6. The Bank of Nova Scotia (“BNS”) was Liberty
 Street’s counterparty for the Aaardvark LAPA, requiring
 BNS to purchase the Aaardvark Note at par value if

     1   Liberty Street Funding LLC’s predecessor was Lib-
 erty Street Funding Corp. See J.A. 17 ¶ 10; J.A. 1431. In
 this opinion, we refer to both entities as Liberty Street.
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 GSS HOLDINGS (LIBERTY) INC. v. US                           3

 Liberty Street exercised the LAPA. See J.A. 619, 626–29,
 1111; Decision at 483–84 & n.5.
     In April 2007, in anticipation of the adoption of certain
 banking regulations, Liberty Street entered into a note
 purchase agreement with an unrelated investor, Recon-
 naissance Investors, LLC (“Reconnaissance”). See J.A. 19–
 20 ¶¶ 19–23; J.A. 739–40, 749–61, 779–81, 790–92; Deci-
 sion at 484–85 & nn.11–14. Under that note purchase
 agreement, Liberty Street issued an Expected Loss Note
 (the “First Loss Note”) to Reconnaissance. 2 See J.A. 19–20
 ¶ 23; J.A. 253, 739–40, 804–06. Reconnaissance funded an
 account (the “First Loss Note Account”) in order to cover
 some of the risk of Liberty Street’s assets. See J.A. 137,
 753, 808–12; Decision at 485 n.14. In other words, Recon-
 naissance’s money paid into the First Loss Note Account
 would be used to compensate BNS in the event of a loss in
 value of Liberty Street’s assets. See J.A. 20–21 ¶¶ 25–26,
 29; J.A. 808, 810–11.
      On December 29, 2011, BNS’s subsidiary, Scotiabank
 (Ireland) Limited (“Scotiabank Ireland”), purchased the
 First Loss Note from Reconnaissance and succeeded Recon-
 naissance’s rights and obligations. See J.A. 148, 1003–09,
 1011–35; see also J.A. 520–26; Decision at 483–85. For tax
 purposes, Scotiabank Ireland’s investment in the First
 Loss Note was treated as a partnership interest in Liberty
 Street. See J.A. 1026; Decision at 484–86. On December
 30, 2011, Liberty Street exercised the Aaardvark LAPA,
 and BNS purchased the Aaardvark Note at a loss. See De-
 cision at 483–85; J.A. 1090. BNS certified this loss to the
 First Loss Note holder, Scotiabank Ireland, causing Lib-
 erty Street to pay $24 million to BNS from the First Loss

     2   Reconnaissance Investors, LLC later assigned the
 First Loss Note to Reconnaissance Investors IV, LLC. See
 J.A. 21 ¶ 32; J.A. 918. In this opinion, we refer to both
 entities as Reconnaissance.
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 4                          GSS HOLDINGS (LIBERTY) INC. v. US

 Note Account. See J.A. 1105; Decision at 484–85. Liberty
 Street’s loss was allocated to GSS. 3 See Decision at 485;
 J.A. 1109–10.
     In June 2013, GSS filed an Amended U.S. Corporation
 Income Tax Return with the Internal Revenue Service
 (“IRS”) for the tax year ending December 2009 and re-
 quested to carry back the allocated 2011 loss to deduct the
 loss from its 2009 tax year. See 26 U.S.C. § 165; J.A. 30–
 62; Decision at 485. In December 2014, the IRS disallowed
 the claimed loss deduction under 26 U.S.C. § 707(b)(1). See
 J.A. 1108–15; Decision at 483, 486. With respect to the
 claimed loss deduction, the IRS focused on Liberty Street’s
 Aaardvark Note sale to BNS and the $24 million payment
 to BNS to conclude that these transactions should be
 treated as a single transaction under the step transaction
 doctrine. See J.A. 1115; Decision at 483, 486, 490. Accord-
 ingly, the IRS disallowed the deduction under 26 U.S.C.
 § 707(b)(1) as a loss from the sale of property (the
 Aaardvark Note) between a partnership (Liberty Street)
 and a person owning more than fifty percent of the capital
 interest in the partnership (Scotiabank Ireland, the subsid-
 iary of BNS). See J.A. 1112–13, 1115; Decision at 483, 490.
 GSS filed a Protest, but the IRS Appeals Office issued a
 notice of disallowance in June 2017. See J.A. 71–72, 1171–
 72; Decision at 486.
     In May 2019, GSS filed a complaint in the Claims
 Court seeking a federal tax refund or credit for the 2009
 tax year concerning its disallowed deduction under 26
 U.S.C. § 165. See J.A. 16–29; Decision at 486. Following
 discovery, GSS moved for summary judgment, and the

     3   Because Liberty Street received approximately
 $1.45 million in insurance proceeds from this event, Lib-
 erty Street’s claimed loss deduction for tax purposes was
 $22,549,612. J.A. 24 ¶¶ 47, 50; J.A. 1110–11, 1438–39; De-
 cision at 484–85.
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 GSS HOLDINGS (LIBERTY) INC. v. US                           5

 government cross-moved for summary judgment. See De-
 cision at 483, 486. In July 2021, the Claims Court denied
 GSS’s motion, granted the government’s cross-motion, and
 entered final judgment in favor of the government. See id.
 at 483, 490; J.A. 1.
    GSS now appeals. We have jurisdiction to hear this
 appeal under 28 U.S.C. § 1295(a)(3).
                  II. STANDARD OF REVIEW
     We review de novo a grant and denial of summary judg-
 ment by the Claims Court. Kimble v. United States, 991
 F.3d 1238, 1242 (Fed. Cir.) (citation omitted), cert. denied,
 142 S. Ct. 98 (2021). Whether the Claims Court applied
 the correct legal standard is a question of law. See McDon-
 nell Douglas Corp. v. United States, 323 F.3d 1006, 1014
 (Fed. Cir. 2003) (citation omitted). We also review ques-
 tions of law de novo. See Golden v. United States, 955 F.3d
 981, 986 (Fed. Cir. 2020) (citation omitted).
                       III. DISCUSSION
      On appeal, GSS raises two independent alleged errors:
 (i) the Claims Court applied an erroneous hybrid legal
 standard that conflated the step transaction doctrine and
 the economic substance doctrine, and (ii) the Claims Court
 violated the principle of party presentation. See Appel-
 lant’s Br. 35–38, 42–44; see also Oral Arg. at 9:16–35,
 https://oralarguments.cafc.uscourts.gov/default.aspx?fl=21
 -2353_01132023.mp3 (GSS acknowledging it raises both
 errors); Oral Arg. at 22:27–45 (the government acknowl-
 edging the same). We agree with GSS that the Claims
 Court erred by applying a hybrid legal standard that im-
 properly conflated the step transaction doctrine and the
 economic substance doctrine. Because we vacate and re-
 mand on that basis, we do not reach GSS’s second chal-
 lenge.
    This court has recognized that various doctrines have
 been judicially developed to enforce the purposes of the tax
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 6                           GSS HOLDINGS (LIBERTY) INC. v. US

 code—two of which are the step transaction doctrine and
 the economic substance doctrine. See Falconwood Corp. v.
 United States, 422 F.3d 1339, 1349 (Fed. Cir. 2005) (“The
 step transaction doctrine is a judicial manifestation of the
 more general tax law ideal that effect should be given to
 the substance, rather than the form, of a transaction[.]” (ci-
 tations omitted)); 4 Coltec Indus., Inc. v. United States, 454
 F.3d 1340, 1353 (Fed. Cir. 2006) (“The economic substance
 doctrine represents a judicial effort to enforce the statutory
 purpose of the tax code.”). Under the end result test of the
 step transaction doctrine, courts first determine whether
 the doctrine applies by examining the series of transactions
 at issue and analyzing whether the “separate transactions
 were really component parts of a single transaction in-
 tended from the outset to be taken for the purpose of reach-
 ing the ultimate result.” 5 Falconwood, 422 F.3d at 1349
 (internal quotation marks and citation omitted); see also
 True v. United States, 190 F.3d 1165, 1174–75 (10th Cir.
 1999) (“[T]he step transaction doctrine . . . operate[s] [by]
 collaps[ing] the individual steps of a complex transaction
 into a single integrated transaction for tax purposes.” (ci-
 tation omitted)). Separately, under the economic sub-
 stance doctrine, courts focus solely on “the transaction . . .
 that gave rise to the alleged tax benefit” and analyze
 whether that specific transaction had “economic sub-
 stance.” Coltec, 454 F.3d at 1355–57.

     4    Our recognition of the relationship between the
 step transaction doctrine and substance over form princi-
 ple dispels the dissent’s concern that we “reject[]” the sub-
 stance over form principle. See Dissent at 3–4.
      5   This inquiry is known as the “end result test,” one
 of the “three basic tests that define the criteria upon which
 application of the step transaction doctrine applies[.]” Fal-
 conwood, 422 F.3d at 1349. The parties agree that the two
 other tests are not at issue. See J.A. 1407, 1483.
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 GSS HOLDINGS (LIBERTY) INC. v. US                           7

      GSS argues that the Claims Court “improperly used
 the economic substance doctrine’s rule looking only to the
 step that creates the tax benefit in analyzing the step
 transaction doctrine.” Appellant’s Br. 43. We agree and
 find that the Claims Court applied a hybrid legal standard
 conflating the step transaction doctrine and the economic
 substance doctrine, which the government agrees “are two
 separate doctrines.” Oral Arg. at 13:26–28. The Claims
 Court started its analysis by correctly recognizing that the
 parties advocated for an analysis under the step transac-
 tion doctrine. See Decision at 486 (“GSS asks the court to
 find that the step transaction doctrine was inappropriately
 applied here . . . ”); id. at 487 (explaining that the govern-
 ment advocated for “an application of the ‘step transaction
 doctrine’”). The Claims Court also correctly recognized
 that the end result test, which determines whether the step
 transaction doctrine applies, involves assessing the
 “[i]ntent of the taxpayer” “from the outset.” Id. at 488–89
 (first citing Falconwood, 422 F.3d at 1349; and then citing
 True, 190 F.3d at 1175) (emphasis added). However, rather
 than proceeding to assess intent from the outset as re-
 quired under the end result test of the step transaction doc-
 trine, the Claims Court instead focused on the transaction
 giving rise to the alleged tax benefit as taught by the eco-
 nomic substance doctrine.
     Citing this court’s Coltec decision—which analyzed the
 economic substance doctrine—the Claims Court incorrectly
 stated that “[t]he transaction . . . to be analyzed” here was
 “the one that gave rise to the alleged tax benefit.” Id. at
 488 (quoting Coltec, 454 F.3d at 1356); see also id. (“[W]e
 find the Coltec analysis particularly apposite here . . .”).
 Applying this hybrid legal standard, the Claims Court con-
 cluded that “[t]he relevant event” to determine intent
 “[wa]s the payment out of [the First Loss Note Account] to
 BNS at the end of 2011.” Id. at 489. Examining this 2011
 timeframe, the Claims Court held that “[t]here [wa]s no
 question that the ‘taxpayer intended to reach a particular
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 8                            GSS HOLDINGS (LIBERTY) INC. v. US

 result’ here, namely, to use the First Loss Note payment to
 offset some of the LAPA counterparty’s losses.” Id. (quot-
 ing True, 190 F.3d at 1175). Accordingly, the Claims Court
 treated these two transactions as a single transaction. Id.
 Specifically, the Claims Court found that GSS’s claimed
 loss was properly disallowed under 26 U.S.C. § 707(b)(1),
 denied GSS’s motion for summary judgment, and granted
 the government’s cross-motion for summary judgment. Id.
 at 490.
      We conclude that the Claims Court applied a hybrid le-
 gal standard to reach its decision. The government con-
 ceded as much during oral argument, stating that “about
 the hybrid test . . . the lower court did borrow from Coltec,
 which is an economic substance case [and] borrowed from
 that case to identify the correct transaction” on which to
 place its focus. Oral Arg. at 21:52–22:08; see also Appellee’s
 Br. 53–54 (the government admitting same); Oral Arg. at
 22:50–23:10 (the government agreeing that the Claims
 Court “discussed both” the step transaction and economic
 substance doctrines); Oral Arg. at 20:35–21:11 (Q: “If we
 were to find that the [Claims] Court . . . started . . . the step
 transaction analysis not at the beginning [i.e., outset], . . .
 would you concede that the [Claims] Court erred?” Gov-
 ernment: “ . . . Yes, because the instruction from all the
 cases that the parties have cited is that you have to start
 the analysis from the beginning [i.e., outset].”). This hybrid
 application was legal error. See Smith v. Gen. Servs. Ad-
 min., 930 F.3d 1359, 1361–62 (Fed. Cir. 2019) (holding that
 the Merit Systems Protection Board legally erred by “con-
 flat[ing] two distinct inquiries”); see also Bryant v. Dep’t of
 Veterans Affs., 26 F.4th 1344, 1347–48 (Fed. Cir. 2022)
 (holding that the Merit Systems Protection Board’s failure
 to apply the correct legal standard was “legally errone-
 ous”); Walther v. Sec’y of Health & Hum. Servs., 485 F.3d
 1146, 1152 (Fed. Cir. 2007) (holding that special master le-
 gally erred by appearing to “apply an incorrect legal stand-
 ard”).
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 GSS HOLDINGS (LIBERTY) INC. v. US                           9

     Accordingly, we vacate the Claims Court’s decision and
 remand for a determination under the correct legal stand-
 ard. See Walther, 485 F.3d at 1146; Smith, 930 F.3d at
 1367; Bryant, 26 F.4th at 1347–48. Specifically, under the
 end result test, the Claims Court must “examine[] whether
 it appears that separate transactions were really compo-
 nent parts of a single transaction intended from the outset
 to be taken for the purpose of reaching the ultimate result.”
 Falconwood, 422 F.3d at 1349 (internal quotation marks
 and citation omitted); see also True, 190 F.3d at 1175.
     As part of this examination, the Claims Court must de-
 termine the outset of the series of transactions, keeping in
 mind that the series of transactions should be considered
 as a whole. Comm’r v. Clark, 489 U.S. 726, 738 (1989); see
 also True, 190 F.3d at 1177; Brown v. United States, 868
 F.2d 859, 862 (6th Cir. 1989). The parties dispute the
 timeframe for the outset, with GSS advocating for the 2006
 and 2007 timeframe when the Aaardvark LAPA and First
 Loss Note agreement were negotiated and entered, and the
 government advocating for the 2011 timeframe when the
 Aaardvark LAPA was renewed 6 and exercised and when
 the First Loss Note Account payment was made to BNS.
 See Appellant’s Br. 33, 44–45; Appellee’s Br. 30–31. Once
 the outset’s timeframe has been assessed, the Claims Court
 must determine the intent from the outset, which is an-
 other disputed issue between the parties. See Falconwood,
 422 F.3d at 1349; Appellant’s Br. 46–48; Appellee’s Br. 30–
 37. If the Claims Court does conclude that the separate
 transactions were “really component parts of a single

     6  In June 2011, Liberty Street and BNS executed a
 Master LAPA, which included a purchase commitment for
 the Aaardvark Note. See J.A. 1327–69. BNS committed to
 purchase the Aaardvark Note in an October 2011 purchase
 commitment agreement with Liberty Street. J.A. 1371–75,
 1377–78; see also J.A. 178–79.
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 10                           GSS HOLDINGS (LIBERTY) INC. v. US

 transaction intended from the outset to be taken for the
 purpose of reaching the ultimate result,” then the step
 transaction doctrine applies. See Falconwood, 422 F.3d at
 1349 (citation omitted). The Claims Court should conduct
 this analysis on remand. We are not suggesting any par-
 ticular outcome; we are simply instructing the Claims
 Court to apply the correct legal standard.
      Even if the Claims Court applied an erroneous legal
 standard, the government contends that the intent was the
 same regardless of the timeframe, and that the Claims
 Court agreed. See Appellee’s Br. 37 (first citing Decision at
 489 (“A payment from the First Loss Note [A]ccount was
 always anticipated to be at least a partial offset of losses
 resulting from the sale of a distressed asset.”); and then
 citing Decision at 489 n.22 (“The First Loss Note was al-
 ways intended to absorb the first loss stemming out of a
 decline in Liberty[] [Street]’s investments.”)); see also Ap-
 pellee’s Br. 30–34. In other words, the government con-
 tends that the same outcome would be reached under the
 correct legal standard. GSS disagrees, contending that the
 intent differed at various timeframes. See Appellant’s Br.
 46–48; Appellant’s Reply Br. 11–15. Since the Claims
 Court applied an incorrect legal standard, the Claims
 Court “should make a new . . . determination under the cor-
 rect standard in the first instance.” Walther, 485 F.3d at
 1152 (declining to reach the merits of a similar argument).
 To the extent any finding of the Claims Court “is derived
 from the application of an improper legal standard to the
 facts, it cannot be allowed to stand.” Id. (citations omitted).
 “In such a circumstance, this court must remand for new
 factual findings in light of the correct legal standard.” Id.
     GSS contends that under the correct legal standard,
 the step transaction doctrine would not operate to collapse
 the individual steps into a single integrated transaction for
 tax purposes. See Appellant’s Br. 44–52. In other words,
 GSS urges this court to reach a determination under the
 correct legal standard in the first instance. But just as we
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 GSS HOLDINGS (LIBERTY) INC. v. US                          11

 will not do so at the government’s request, we will not do
 so at GSS’s request.
                       IV. CONCLUSION
     We have considered the government’s remaining argu-
 ments and find them unpersuasive. For the above reasons,
 we vacate the Claims Court’s judgment and remand for fur-
 ther proceedings consistent with this opinion.
                VACATED AND REMANDED
                            COSTS
 No costs.
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    United States Court of Appeals
        for the Federal Circuit
                  ______________________

           GSS HOLDINGS (LIBERTY) INC.,
                 Plaintiff-Appellant

                             v.

                    UNITED STATES,
                    Defendant-Appellee
                  ______________________

                        2021-2353
                  ______________________

     Appeal from the United States Court of Federal Claims
 in No. 1:19-cv-00728-EGB, Senior Judge Eric G. Bruggink.
                  ______________________
 NEWMAN, Circuit Judge, dissenting.
     The United States Court of Federal Claims (“CFC”) af-
 firmed a ruling of the Internal Revenue Service (“IRS”),
 disallowing a tax loss claimed by GSS Holdings (Liberty)
 Inc. (“Liberty”). 1 The loss was disallowed because the
 transaction was with a related party, and subject to
 26 U.S.C. § 707(b). The decision of the CFC was correct in
 law and as applied to the facts. From the panel majority’s
 ruling that incorrect law was applied, I respectfully dis-
 sent.

     1   GSS Holdings (Liberty) Inc. v. United States, 154
 Fed. Cl. 481 (2021) (“CFC Op.”).
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 2                           GSS HOLDINGS (LIBERTY) INC. v. US

                         DISCUSSION
     It is not disputed that “on December 30, 2011, BNS
 [Bank of Nova Scotia] and Liberty were related parties for
 tax purposes.” CFC Op. at 489. The IRS disallowed GSS’s
 claimed tax loss deduction, applying 26 U.S.C.
 § 707(b)(1)(A):
     [§ 707](b) Certain sales or exchanges of prop-
     erty with respect to controlled partnerships
         (1) Losses disallowed.
         No deduction shall be allowed in respect of
         losses from sales or exchanges of property
         (other than an interest in the partnership),
         directly or indirectly, between—
             (A) a partnership and a person
             owning, directly or indirectly, more
             than 50 percent of the capital inter-
             est, or the profits interest, in such
             partnership, or
             (B) two partnerships in which the
             same persons own, directly or indi-
             rectly, more than 50 percent of the
             capital interests or profits inter-
             ests.
 The CFC held that the claimed loss was correctly disal-
 lowed, explaining:
     Because the First Loss Note payment is properly
     classed as part of the LAPA [liquidity asset pur-
     chase agreement] investment sale, § 707(b)(1) dis-
     allows deducting losses on the sale of assets to a
     related party, and the First Loss Note payment was
     thus properly disallowed.
 CFC Op. at 490.
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 GSS HOLDINGS (LIBERTY) INC. v. US                            3

     The transfer of money and assets was conducted
 through a complex series of steps, as the panel majority re-
 cites. Maj. Op. at 2–4. However, the majority holds that
 the CFC erred in invoking “the larger tax law concept of
 ‘substance over form,’” CFC Op. at 487, and erroneously
 “applied a hybrid legal standard conflating the step trans-
 action doctrine and the economic substance doctrine,” Maj.
 Op. at 7. However, the CFC well understood and correctly
 applied the governing law. As stated in King Enters., Inc.
 v. United States, 418 F.2d 511, 516 n.6 (Ct. Cl. 1969):
     [C]ourts have enunciated a variety of doctrines,
     such as step transaction, business purpose, and
     substance over form. Although the various doc-
     trines overlap and it is not always clear in a partic-
     ular case which one is most appropriate, their
     common premise is that the substantive realities of
     a transaction determine its tax consequences.
 We explained the role of “step transaction” analysis within
 the “substance over form” analysis of tax effects of transac-
 tions:
     The step transaction doctrine is a judicial manifes-
     tation of the more general tax law ideal that effect
     should be given to the substance, rather than the
     form, of a transaction, “by ignoring for tax pur-
     poses, steps of an integrated transaction that sepa-
     rately are without substance.”
 Falconwood Corp. v. United States, 422 F.3d 1339, 1349
 (Fed. Cir. 2005) (quoting Dietzsch v. United States, 498
 F.2d 1344, 1346 (Ct. Cl. 1974)).
     The CFC applied this guidance, mindful that “[t]o per-
 mit the true nature of a transaction to be disguised by mere
 formalisms, which exist solely to alter tax liabilities, would
 seriously impair the effective administration of the tax pol-
 icies of Congress.” Comm’r v. Court Holding Co., 324 U.S.
 331, 334 (1945). The CFC remarked that “particularly
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 4                             GSS HOLDINGS (LIBERTY) INC. v. US

 close scrutiny” should be given when a transaction does
 “not affect the economic interest of independent third par-
 ties,” CFC Op. at 488 (quoting Coltec Indus. v. United
 States, 454 F.3d 1340, 1357 (Fed. Cir. 2006)), and that
 “where parties are interrelated, the court may exercise ‘a
 height[en]ed level of skepticism and scrutiny in th[e] mat-
 ter,’” CFC Op. at 488 n.21 (quoting True v. United States,
 190 F.3d 1165, 1173 n.6 (10th Cir. 1999)).
     The panel majority faults the CFC for applying “a hy-
 brid legal standard conflating the step transaction doctrine
 and the economic substance doctrine.” Maj. Op. at 7. The
 CFC indeed applied “the larger family of substance over
 form cases.” CFC Op. at 488. This is not a fault; it is the
 required procedure of precedent. See Frank Lyon Co. v.
 United States, 435 U.S. 561, 573 (1978) (“In applying this
 doctrine of substance over form, the Court has looked to the
 objective economic realities of a transaction rather than to
 the particular form the parties employed.”).
     This principle has spawned varied adaptations in vari-
 ous circumstances. See Penrod v. Comm’r, 88 T.C. 1415,
 1428 (1987) (“The step transaction doctrine is in effect an-
 other rule of substance over form; it treats a series of for-
 mally separate ‘steps’ as a single transaction if such steps
 are in substance integrated, interdependent, and focused
 toward a particular result.”).
     The CFC appropriately reviewed the activity concern-
 ing transfer of the Aaardvark Note and the related parties,
 with the objective to “give tax effect to the substance, as
 opposed to the form of a transaction, by ignoring for tax
 purposes, steps of an integrated transaction that sepa-
 rately are without substance.” Dietzsch, 498 F.2d at 1346.
 Statute and precedent are unequivocally in accord with the
 CFC’s reasoned analysis. There is no basis in law or prec-
 edent for the panel majority’s rejection of the “substance
 over form” standard.
     I respectfully dissent.