The US Tax Court has granted an option to a related entity for real property, ruling that it was not a sham transaction. The case involved a partnership that owned real property and granted an option to a related entity to purchase the property. The IRS argued that the option was a sham and should be disregarded for tax purposes, but the Tax Court disagreed and allowed the option to stand.
The U.S. Tax Court yesterday released a memorandum opinion rejecting the IRS’ contention that the taxpayer engaged in a sham transaction and wrongly assigned $4.2 million of income to a related entity under an option granted to the entity with respect to real property.
The case is: Parkway Gravel, Inc. v. Commissioner, T.C. Memo 2024-59 (May 21, 2024). Read the Tax Court’s opinion
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