26 C.F.R. § 1.269-2

Purpose and scope of section 269

Read at: eCFRecfr.gov CornellLII GovInfogovinfo.gov CasesGoogle Scholar

(a) General. Section 269 is designed to prevent in the instances specified therein the use of the sections of the Internal Revenue Code providing deductions, credits, or allowances in evading or avoiding Federal income tax. See § 1.269-3.

(b) Disallowance of deduction, credit, or other allowance. Under the Code, an amount otherwise constituting a deduction, credit, or other allowance becomes unavailable as such under certain circumstances. Characteristic of such circumstances are those in which the effect of the deduction, credit, or other allowance would be to distort the liability of the particular taxpayer when the essential nature of the transaction or situation is examined in the light of the basic purpose or plan which the deduction, credit, or other allowance was designed by the Congress to effectuate. The distortion may be evidenced, for example, by the fact that the transaction was not undertaken for reasons germane to the conduct of the business of the taxpayer, by the unreal nature of the transaction such as its sham character, or by the unreal or unreasonable relation which the deduction, credit, or other allowance bears to the transaction. The principle of law making an amount unavailable as a deduction, credit, or other allowance in cases in which the effect of making an amount so available would be to distort the liability of the taxpayer, has been judicially recognized and applied in several cases. Included in these cases are Gregory v. Helvering (1935) (293 U.S. 465; Ct. D. 911, C.B. XIV-1, 193); Griffiths v. Helvering (1939) (308 U.S. 355; Ct. D. 1431, C.B. 1940-1, 136); Higgins v. Smith (1940) (308 U.S. 473; Ct. D. 1434, C.B. 1940-1, 127); and J. D. & A. B. Spreckles Co. v. Commissioner (1940) (41 B.T.A. 370). In order to give effect to such principle, but not in limitation thereof, several provisions of the Code, for example, section 267 and section 270, specify with some particularity instances in which disallowance of the deduction, credit, or other allowance is required. Section 269 is also included in such provisions of the Code. The principle of law and the particular sections of the Code are not mutually exclusive and in appropriate circumstances they may operate together or they may operate separately. See, for example, § 1.269-6.

[T.D. 6595, 27 FR 3596, Apr. 14, 1962]

Notes of Decisions

Cited in 4 cases, 1964–2015 · leading case: Canaveral Int'l Corp. v. Comm'r, 61 T.C. 520 (Tax Ct. 1974).

Sort: Relevance Newest Treatment

Canaveral Int'l Corp. v. Comm'r, 61 T.C. 520 (Tax Ct. 1974). · cites it 2× “At the prevailing corporate tax rates, the tax windfall from Norango's high basis in the yacht so far exceeded petitioner's investment in Norango's stock that the consolidated group could have realized a net profit even if the newly acquired yacht had sunk on its first voyage.”

Princeton Aviation Corp. v. Comm'r, 47 T.C.M. 575 (Tax Ct. 1983). · cites it 2× “Respondent's section 269 argument, simply put, is that at the time of the exercise of the option to acquire the PAC stock, Met Mooney's only intent could have been to receive the windfall benefit of a $825,000 net operating loss carryforward in exchange for $1.”

Cromwell Corp. v. Comm'r, 43 T.C. 313 (Tax Ct. 1964). · cites it 2× “The net effect of the transactions which respondent attacks is to substitute Cornwell for Cromwell as primary obligor on the bank loan. The petitioners, taken as a business entity, have received no net income from the transactions; the principals have received nothing from the…”

Wells Fargo & Co. v. United States, 143 F. Supp. 3d 827 (D. Minnesota 2015). “See 26 C.F.R. § 1.269-2 (b). The fact remains, however, that the disputed tax benefits must be benefits that the taxpayer “would not [have] otherwise enjoyfed]” in the absence of the § 269 acquisition.”

Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.