Audrey M. Thompson, Florence Ain & Gregory Ain, Dorothy E. Kahan & Robert Kahan, Nana Berman & William Berman v. Commissioner of Internal Revenue

These three consolidated cases involve taxpayers who were partners and investors in a partnership and corporation that were involved in a series of transactions relating to the development of real property. These taxpayers appeal from adverse judgments of the Tax Court, which disallowed deductions taken by the taxpayers during three tax years, and which found that the transactions giving rise to the deductions lacked economic substance. The Tax Court’s findings were not clearly erroneous, and we affirm its judgments.

The three cases here on appeal, in addition to a fourth that was resolved favorably to the taxpayers, were consolidated for hearing in the Tax Court because they all arose from the same complicated series of transactions. The named petitioner in each case represented many other petitioners who have agreed to be bound by the outcome of this litigation. The cases were largely tried upon stipulated facts. The Tax Court’s extended and -accurate compilation of the facts are recounted in its opinion, Thompson v. Commissioner, 66 T.C. 1024 (1976). For our purposes, it is necessary to detail only the most pertinent facts.

A. The Kahan Case

Because of its relevance to later…