OPINION
DAWKINS, Chief Judge.
Supreme Investment Corporation (Supreme) seeks refund of $852 plus interest for taxes allegedly illegally and erroneously paid for the fiscal year ending November 30, 1965. As in most tax cases, what really is at issue here, under the posture of principle, is principal. The principal involved is about $83,000 of potential income which could escape taxation. The principle in question is [1329]*1329whether plaintiff is entitled to a stepped-up basis on a note acquired by-liquidation of its subsidiary under provisions of the Internal Revenue Code more specifically discussed below.
Plaintiff is a Louisiana corporation incorporated in 1959 with its principal place of business in Ouachita Parish. Prior to February 17, 1965, Supreme had a total of 87½ outstanding shares of stock owned by R. D. Kellogg. On that date, Kellogg sold to Thomas W. Leigh and Robert L. Curry III ten shares each of the stock at a price of $250 per share. On February 22, 1965, plaintiff redeemed 57½ shares of R. D. Kellogg’s stock; plaintiff’s outstanding stock thereafter being owned ten shares each by Messrs. Kellogg, Leigh and Curry. Curry and Leigh were Kellogg’s attorneys both before and during the transactions here in question. Mr. Curry holds a Master’s degree in the Law of Taxation.
February 26, 1965, Supreme purchased all of the outstanding stock of CKS Corporation (CKS), a Louisiana corporation also with its principal place of business in Ouachita Parish, from Robert L. Kellogg, the son of R. D. Kellogg. Robert owned all the CKS stock prior to February, 1965, and allegedly (Robert did not testify) wanted to dispose of it because of difficulties he was encountering with the corporation — primarily tax difficulties. Both father and son were advised by lawyers and tax men not to enter into a sale between themselves because of detrimental tax consequences.1 To avoid this, R. D. Kellogg was advised to, and did, reduce his ownership of plaintiff’s stock below fifty per cent of the total shares outstanding. In accomplishing this, he effected the above described transaction with Curry and Leigh; and then Supreme purchased CKS Corporation.
April 19, 1965, Supreme elected to liquidate CKS and on April 26, 1965, certain assets, including a promissory note dated July 31, 1956, drawn by Star Motel, Inc., and payable to the order of CKS in the principal amount of $400,-000, with 4% per annum interest thereon from idate until paid, were transferred by CKS in consideration of plaintiff’s surrender of certain liabilities due and owing by CKS. As part of this transaction, plaintiff assumed a $125,-000 note payable by Robert Kellogg to his father, R. D. Kellogg. Robert was in his twenties at this time. Curry, who at that time owned one-third of the outstanding shares of Supreme, represented CKS. in this transaction as its duly appointed liquidator.
CKS had been reporting its collection on the $400,000 Star Motel note on the installment method authorized by Section 453 of the Code, whereby, in general, the gain realized is recognized ratably over the period of collections upon the note. At the time of its liquidation, CKS had a cost basis of $141,639.80. Plaintiff’s adjusted basis in the stock of CKS, together with that portion of the liabilities assumed by plaintiff upon receipt of the obligation, totalled $204,-235.37.
Supreme contends that the latter figure should constitute its tax basis in the Star Motel note for federal income tax purposes, and defendant contends that the former figure is the proper tax basis.
Plaintiff contends that the interrelationships between Sections 332,2 334(b) [1330]*1330(2),3 336,4 and 453(d) (4)5 of the Revenue Code entitles it to the stepped-up basis. In general, under these sections, when a parent corporation distributes an [1331]*1331installment obligation in the course of corporate liquidation of a subsidiary, the property received in distribution shall have a basis equal to the adjusted basis of the stock with respect to which the distribution was made.
The Government contends inter alia6 that Section 2697 denies to plaintiff the tax benefits which it seeks. This section provides that if any person or persons acquire, directly or indirectly, control of a corporation, and the principal purpose for which such acquisition was made is evasion or avoidance of federal income tax by securing the benefit of a deduction, credit, or other allowance which such taxpayer would not otherwise enjoy, then such deduction, credit, or other allowance may be disallowed.
Section 1.269-1 (a) of the Regulations provides:
“The term ‘allowance’ refers to anything in the Internal Revenue laws which has the effect of diminishing tax liability. The term includes, among other things, a deduction, a credit, an adjustment, an exemption or an exclusion.”
We agree with the Government’s contention that the term “allowance,” as used in Section 269, encompasses the benefit sought to be obtained by plaintiff — a benefit which, in the absence of its altered ownership structure and the bringing into play of Section 332, it otherwise could not have obtained. Specifically, this is the benefit granted by Sections 453(d) (4) (A) and 334(b) (2), the non-recognition of gain and the substitution of a stepped-up basis.
The legislative history and the broad scope given Section 269 supports this position:
“This section is designed to put an end promptly to any market for, or dealings in, interest in corporations or property which have as their objective the reduction through artifice of the [1332]*1332income or excess profits liability. * * * the section has not confined itself to a description of any particular method for carrying out such tax avoidance schemes but has included within its scope these devices in whatever form they appear * * 8
(Emphasis added.)
The determining question then is whether the parties involved in the transactions here had as their principal purpose the avoidance or evasion of federal income tax. The principal purpose is that purpose which exceeds all others in importance.9
The determination by the Government that the principal purpose for effecting the transactions here was to obtain an “allowance” and thus avoid taxes is presumptively correct.10
“Theoretically the question of purpose is purely subjective; pragmatically, however, the trier of fact can only determine purpose from objective facts. Thus, unless the tax payer can muster facts sufficiently plausible to convince the trier of the purity of his motives the IRS will prevail.” (Emphasis added.) Bobsee Corp. v. United States, 411 F.2d 231, 238 (5th Cir. 1969).
Here, the father-son attorney-client relationships create circumstances which must invite close scrutiny even absent a presumption favoring the Government’s determination.
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OPINION
DAWKINS, Chief Judge.
Supreme Investment Corporation (Supreme) seeks refund of $852 plus interest for taxes allegedly illegally and erroneously paid for the fiscal year ending November 30, 1965. As in most tax cases, what really is at issue here, under the posture of principle, is principal. The principal involved is about $83,000 of potential income which could escape taxation. The principle in question is [1329]*1329whether plaintiff is entitled to a stepped-up basis on a note acquired by-liquidation of its subsidiary under provisions of the Internal Revenue Code more specifically discussed below.
Plaintiff is a Louisiana corporation incorporated in 1959 with its principal place of business in Ouachita Parish. Prior to February 17, 1965, Supreme had a total of 87½ outstanding shares of stock owned by R. D. Kellogg. On that date, Kellogg sold to Thomas W. Leigh and Robert L. Curry III ten shares each of the stock at a price of $250 per share. On February 22, 1965, plaintiff redeemed 57½ shares of R. D. Kellogg’s stock; plaintiff’s outstanding stock thereafter being owned ten shares each by Messrs. Kellogg, Leigh and Curry. Curry and Leigh were Kellogg’s attorneys both before and during the transactions here in question. Mr. Curry holds a Master’s degree in the Law of Taxation.
February 26, 1965, Supreme purchased all of the outstanding stock of CKS Corporation (CKS), a Louisiana corporation also with its principal place of business in Ouachita Parish, from Robert L. Kellogg, the son of R. D. Kellogg. Robert owned all the CKS stock prior to February, 1965, and allegedly (Robert did not testify) wanted to dispose of it because of difficulties he was encountering with the corporation — primarily tax difficulties. Both father and son were advised by lawyers and tax men not to enter into a sale between themselves because of detrimental tax consequences.1 To avoid this, R. D. Kellogg was advised to, and did, reduce his ownership of plaintiff’s stock below fifty per cent of the total shares outstanding. In accomplishing this, he effected the above described transaction with Curry and Leigh; and then Supreme purchased CKS Corporation.
April 19, 1965, Supreme elected to liquidate CKS and on April 26, 1965, certain assets, including a promissory note dated July 31, 1956, drawn by Star Motel, Inc., and payable to the order of CKS in the principal amount of $400,-000, with 4% per annum interest thereon from idate until paid, were transferred by CKS in consideration of plaintiff’s surrender of certain liabilities due and owing by CKS. As part of this transaction, plaintiff assumed a $125,-000 note payable by Robert Kellogg to his father, R. D. Kellogg. Robert was in his twenties at this time. Curry, who at that time owned one-third of the outstanding shares of Supreme, represented CKS. in this transaction as its duly appointed liquidator.
CKS had been reporting its collection on the $400,000 Star Motel note on the installment method authorized by Section 453 of the Code, whereby, in general, the gain realized is recognized ratably over the period of collections upon the note. At the time of its liquidation, CKS had a cost basis of $141,639.80. Plaintiff’s adjusted basis in the stock of CKS, together with that portion of the liabilities assumed by plaintiff upon receipt of the obligation, totalled $204,-235.37.
Supreme contends that the latter figure should constitute its tax basis in the Star Motel note for federal income tax purposes, and defendant contends that the former figure is the proper tax basis.
Plaintiff contends that the interrelationships between Sections 332,2 334(b) [1330]*1330(2),3 336,4 and 453(d) (4)5 of the Revenue Code entitles it to the stepped-up basis. In general, under these sections, when a parent corporation distributes an [1331]*1331installment obligation in the course of corporate liquidation of a subsidiary, the property received in distribution shall have a basis equal to the adjusted basis of the stock with respect to which the distribution was made.
The Government contends inter alia6 that Section 2697 denies to plaintiff the tax benefits which it seeks. This section provides that if any person or persons acquire, directly or indirectly, control of a corporation, and the principal purpose for which such acquisition was made is evasion or avoidance of federal income tax by securing the benefit of a deduction, credit, or other allowance which such taxpayer would not otherwise enjoy, then such deduction, credit, or other allowance may be disallowed.
Section 1.269-1 (a) of the Regulations provides:
“The term ‘allowance’ refers to anything in the Internal Revenue laws which has the effect of diminishing tax liability. The term includes, among other things, a deduction, a credit, an adjustment, an exemption or an exclusion.”
We agree with the Government’s contention that the term “allowance,” as used in Section 269, encompasses the benefit sought to be obtained by plaintiff — a benefit which, in the absence of its altered ownership structure and the bringing into play of Section 332, it otherwise could not have obtained. Specifically, this is the benefit granted by Sections 453(d) (4) (A) and 334(b) (2), the non-recognition of gain and the substitution of a stepped-up basis.
The legislative history and the broad scope given Section 269 supports this position:
“This section is designed to put an end promptly to any market for, or dealings in, interest in corporations or property which have as their objective the reduction through artifice of the [1332]*1332income or excess profits liability. * * * the section has not confined itself to a description of any particular method for carrying out such tax avoidance schemes but has included within its scope these devices in whatever form they appear * * 8
(Emphasis added.)
The determining question then is whether the parties involved in the transactions here had as their principal purpose the avoidance or evasion of federal income tax. The principal purpose is that purpose which exceeds all others in importance.9
The determination by the Government that the principal purpose for effecting the transactions here was to obtain an “allowance” and thus avoid taxes is presumptively correct.10
“Theoretically the question of purpose is purely subjective; pragmatically, however, the trier of fact can only determine purpose from objective facts. Thus, unless the tax payer can muster facts sufficiently plausible to convince the trier of the purity of his motives the IRS will prevail.” (Emphasis added.) Bobsee Corp. v. United States, 411 F.2d 231, 238 (5th Cir. 1969).
Here, the father-son attorney-client relationships create circumstances which must invite close scrutiny even absent a presumption favoring the Government’s determination. These circumstances and the lack of compelling evidence as to real business purposes for the transactions lead to a strong inference that the transactions were not bona fide, actual and genuine, but were mere sham transactions or at best transactions having as their primary purpose the evasion of taxes.
We must conclude that plaintiff has not affirmatively established that the transactions had other than as their most important purpose tax avoidance. We do not find that the primary purpose in purchasing and liquidating CKS was the acquiring of its assets (including the $125,000 note made by son in favor of father) for investment or business purposes.
Nor do we think that the acquisition of ownership by Curry and Leigh was motivated primarily by a desire to secure a bona fide business interest in Supreme Investment Corporation. Supreme had as its primary assets and source of income a small leasehold which was subsequently allowed to expire. The Star Motel note was subsequently sold to Kellogg Realty, another of R. D. Kellogg’s ventures, without cash consideration, being offset by a liability with Kellogg Realty.
The cases relied upon by plaintiff do not require a different result.11 In each of those cases, the critical question was whether the transactions had as their primary purpose the avoidance of taxes. Here we find that the primary motivation was to avoid taxes. Unlike Cherry, upon which plaintiff places great emphasis, we do not find an “affirmative uncontradicted record.”12 On the contrary, the facts here, especially the relationships between the parties and the corporations, and the structure of the corporations, create a clear case of a tax avoidance purpose. Plaintiff has not demonstrated “the purity of [its] motives” as relating to business purpose rather than tax avoidance. We cannot [1333]*1333accept the mere form of the transactions when their substance appears otherwise.13
By this ruling we do not imply any lack of personal or business integrity upon any of the parties involved, but we must hold, under the circumstances involved, that plaintiff’s prayer for relief must be denied.
A proper decree should be presented.