Tax Law | Expert Legal Commentary
July 19, 2010
Klauer v. Commissioner: Step Transaction Doctrine Does Not Apply to Multi-Step Bargain Sales to Charity
William R. Klauer v. Commissioner of Internal Revenue
By
H. Jacob Lager of Zuber & Taillieu LLP
The Tax Court has held that the step transaction doctrine did not apply to a series of bargain sales from a family-owned S Corp. to a charitable organization. As a result, the shareholders were entitled to charitable contribution deductions related to the sales. In William R. Klauer v. Commissioner of Internal Revenue, T.C. Memo 2010-65, 2010 WL 1293209 (U.S. Tax Court 2010), the Tax Court considered the three prevailing tests to determine whether the step transaction doctrine applied: The “binding commitment” test, the “end result” test, and the “interdependence” test. Because none of these tests applies to the series of transactions at issue, the step transaction doctrine did not apply.
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About the Author
H. Jacob Lager is a Partner of Zuber & Taillieu LLP, focusing on tax law.
Image Credit: ©iStockphoto.com/rachwal81