Magic Bullet? Maybe this: the foreclosure “team” are all witnesses, not claimants

The fact that the foreclosure players know — or even witnessed — the fact that you refused to make any further payments makes them a witness, not a claimant. 
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The investment banks say they are not liable as lenders for noncompliance with lending laws. OK. A good lawyer can make a powerful argument for estoppel — the investment banks cannot take one position — that it wasn’t a loan in terms of regulation of lenders   — and then that it is a loan so they can foreclose without a creditor.
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Two wrongs don’t make something right. The fact that they used a shill as the originator doesn’t mean they are allowed or should be allowed to use another shill to falsely invoke foreclosure laws and procedures. You can’t foreclose on a debt that does not exist.
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Most homeowners take out their frustration by attacking the judge or the opposing lawyer. This is a mistake on many levels.
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My concern here is that you are far too interested in two subjects that have the least probability of you achieving anything. The object of your ire is understandable. But you may be playing into the hand of the banks if you continue.
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The Judge, even if he or she is the most reprehensible person on Earth, is simply untouchable without very specific evidence that links the Judge to a corrupt scheme in which the decision of the Judge is directly tied to the scheme and where the Judge receives a  specifically identified reward for a corrupt decision. This does not exist in your case and it rarely exists in any case. So attacks on the Judge’s integrity or intelligence will provoke what they would when you attack anyone for anything. They get defensive and antagonistic — just the opposite of what you need.

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The foreclosure mill, even if they too consist of the most reprehensible human beings on the planet, is considered immune from liability for misrepresenting things in court. You don’t need to agree with this for it to be true. And railing against that fact will get you nowhere. I have tried to go after the lawyers and the result has been consistently negative — claim dismissed because of “litigation immunity.”
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So going after the Judge and the lawyers is a waste of valuable time, money and energy — something that the banks need you to do because they are sitting on a plan that claims money due when there is no money due to them, if at all. That is foreclosure.
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So if you are addressing the Judge for example, you first do what you must do whenever you are attempting to establish rapport with anyone — find common ground. You talk about obvious things about which you all agree so you are perceived as reasonable.
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THEN you move on to your argument about how this situation does not lead to the same result as the conventional case of foreclosure where an actual creditor is actually claiming a right to payment of an actual debt that is actually carried on its books as an asset receivable, which means that nonpayment did in fact cause it financial injury.
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Under our laws and just plain common sense, if you see someone rob a bank for example, then you, as a witness, have no right to sue the robber for the money they stole; true simply because they didn’t steal it from you. Why should you get any money that was stolen from the bank? And that is your point. The fact that the foreclosure players know — or even witnessed — the fact that you refused to make any further payments makes them a witness, not a claimant. 
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And yet…. if you do make the claim against the robber and the bank failed to press its own claim, you could get a judgement especially if the robber failed to raise any defenses. After all he knows he stole the money. [I am not equating homeowners with robbers. I am equitating banks with a unscrupulous version of you, making a claim to which you and  they are not entitled to receive any redress under law or common sense.]
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The question is not whether you owed the money or had any reason to pay or not to pay. The question is why are they appearing as claimants instead of witnesses in a claim by someone who actually did suffer some financial loss caused by your alleged nonpayment.
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And the question is why isn’t such a person (creditor) present in the foreclosure? Where are they? Who are they? Do they exist? If they don’t exist, was the transaction with the homeowner actually a loan transaction or was it something else entirely that was disguised as a loan transaction? 
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So you START with the premise that all legal debts should be paid to the obligee — the person to whom the debt is owed. Everyone agrees with that. And you follow with the premise, under the U.S. Constitution, that only people who have been injured can seek redress in court. You get the judge to agree that everyone agrees that if someone fails to pay a mortgage debt to someone who owns it, they should be subject to foreclosure, forced sale of their home, no matter how long it has been in the family, and evicted if they try to stay anyway.
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You talk about it as though you are in favor of foreclosure because that is where every judge starts. You don’t talk about foreclosure as though it is a new scheme that doesn’t have any support in logic or law because foreclosure has existed for centuries. It must exist because if someone parts with their money to give you a loan, they must be able to force repayment if you are unable or unwilling to make repayment. But that does not mean that a witness to nonpayment can make a claim.
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And you must take the time to study and understand the true nature of what has been really been going on. Securitization is by definition the issuance of securities. While it can be a source of financing it is just as often a means to distribute risk. The reason why thinly capitalized companies like DiTech and Quicken Loans were given hundreds of millions of dollars to sell trillions of dollars of low interest loans was not because the investment banks had come up with a new formula to squeeze profit out of low interest payments.
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It was because the return of principal and interest payments was irrelevant to their plan. The “failure” of such repayment plans was a centerpoint of the plan and they bet on it, making more and more money as each “loan” “failed.” Their plan was to sell securities. And the more securities they sold the more money they made because unlike all other securitization plans, they were not selling securities from an independent legal entity (client) that was going into business and using the proceeds to conduct or grow its business.
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Instead they were selling securities for themselves, taking the money and using as little of it as possible to cover the scheme. The money used to create the illusion of loans was a cover for the real scheme.
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The money, if any, that was sent to closing agents to close a transaction that was inaccurately described as a loan transaction was not delivered by the banks with the intent of creating a conventional loan product subject to lending laws. That would have made the investment bank a lender and they would have been named as such on the note and mortgage.
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Quite the contrary. It was designed to evade lending laws in a scheme that had has its hallmark claims by the investment banks, who were running the show, that the scheme did not subject them to lending laws and was not a loan. 
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By designating a false flag “originator” who was contractually unrelated to the investment bank and who received fees and bonuses from acting as though it was a lender, the banks now claim that they are not regulated by lending laws.
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My position is take them at their word and stop fighting them.
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OK, you are right but the only reason you are not subject to lending laws is that you did not engage in lending. So the money that arrived at the closing table was disguised conditional payment in exchange for a the homeowner’s signature on documents that could be used to fill in data on a spreadsheet.
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It was that data (not the loans) that was sold dozens of times thus relieving the investment bank from any risk of loss. The money was a fee paid to homeowners who were lured into transactions that were fraudulently disguised as loans but were in fact part of a plan to steal money and homes.
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Foreclosure is sought because it represents still more revenue and because by not foreclosing the banks would be admitting this wasn’t a loan in the first place. The money that went to homeowners or which was paid on their behalf was not a loan — it was only part of payment of a fee to which the homeowner was entitled (under quantum meruit) but knew nothing about and never had any opportunity to engage in free market negotiation.
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The reason why (a) there is no creditor and the reason why (b) all the documents are fabricated and (c) all this testimony is pre-scripted for perjury is simply that it wasn’t a loan to begin with — and nobody now is carrying the loan as an asset receivable on their books. NOBODY! The loan does not and never did exist. And that is because the money received was not a loan, it was payment for signature and implied consent to use private data for resale.
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The most basic law of contract is that there must be, at the outset, a meeting of the minds. The homeowner went into the transaction believing the false assertions that the money was a loan — instead of consideration for use of his or her private financial information and his or her signature.
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The investment bank went into the transaction through a myriad of sham conduits posing as “lenders” for exorbitant fees. The investment banks were not lending money. They were paying money so they could issue and profit from the sale of securities in “securitization.” Without that there would have been transaction at all. Refer to the “Step Transaction Doctrine” and “Single Transaction Doctrine” for support in case decisions and statutes. You’ll find multiple references on this blog from the early days (2007–2008) of this blog.
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The investment banks say they are not liable as lenders for noncompliance with lending laws. OK. A good lawyer can make a powerful argument for estoppel — the investment banks cannot take one position — that it wasn’t a loan in terms of regulation of lenders   — and then that it is a loan so they can foreclose without a creditor.
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But to get the judge to even consider such an apparently ridiculous assertion you need to demonstrate, step by step, relentlessly, that the foreclosure team has nothing. That doesn’t happen in one pleading or one hearing. It ONLY happens if you know and consistently use and apply the rules and laws relating to court procedure, discovery and trial objections.
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PRACTICE NOTES:
This argument can be made directly where the transaction was originated by the investment banks. Don’t get lost in the “warehouse lender” thickets — they were just one of many steps in a the circuitous process by which investment banks gave money to homeowners.
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But where a real loan was actually made by a real lender and then acquired by investment banks through what they called “securitization” then the argument shifts to the idea that the debt was extinguished at acquisition. this is because when all was said and done there was no creditor who was holding the debt as an asset receivable on its books.
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The fundamental point here, which can be corroborated with any knowledgeable person in the world of finance, is that neither the delivery of money to homeowners nor the acquisition of the debt after a real loan was originated was related to securitization as it had ever been done in the past.
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Securitization is simply the process of dividing up an asset into shares and selling them. This was never done in connection with these transactions. Nobody ever received a share of any loan. Securitization in this context consisted solely of the issuance of securities by the securities brokerage firm (investment bank) posing as an underwriter for a “trust name” that was merely a fictitious name of the the underwriter itself. That is not securitization. The job of the litigator is to gently and relentlessly lead the judge to conclude that this might indeed be the case and thus deny the foreclosure.
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Neil F Garfield, 73, is a Florida licensed attorney. He has received multiple academic and achievement awards in business and law. He is a former investment banker. securities analyst, and financial analyst.

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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. IN FACT, STATISTICS SHOW THAT MOST HOMEOWNERS FAIL TO PRESENT THEIR DEFENSE PROPERLY. EVEN THOSE THAT PRESENT THE DEFENSES PROPERLY LOSE, AT LEAST AT THE TRIAL COURT LEVEL, AT LEAST 1/3 OF THE TIME. IN ADDITION IT IS NOT A SHORT PROCESS IF YOU PREVAIL. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
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One Step Closer:It’s Impossible to Tie Any Investors to Any Loan

The current talking points used by the Banks is that somehow the Trust can enforce the alleged loan even though it is the “investors” who own the loan. But that can only be true if the Trust owns the loan which it doesn’t. And naming the “investors” as the creditor does nothing to clarify the situation — especially when the “investors” cannot be identified.

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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see http://4closurefraud.org/2016/06/07/unsealed-doj-confirms-holders-of-securitized-loans-cannot-be-traced/

I know of a case pending now where US Bank allegedly sued as Trustee of what appears to be named Trust. In Court the corporate representative of the servicer admitted that the creditor was a group of investors that he declined to name. I knew that meant two things: (1) neither he nor anyone else knew which investor was tied to the subject loan and (2) the “Plaintiff” Trust had never acquired the loan and therefore had no business being in court.

The article in the above link demonstrates that not even the FBI could figure out the identity of the investors. And as we have seen across the country whenever the homeowner asks for discovery of the identity of the creditor it is met with multiple objections and claims that the information about the identity of the debtor’s credit is proprietary. This is an absurd claim and it seeks to have the court rubber stamp a blatant violation of Federal and State lending laws which require the disclosure of the identity of the “lender.”

The only thing the article gets wrong is the statement that the loans were sold into a trust. That is obviously false. If the investors are the creditors, then their money was used to fund the origination or acquisition of the loan — without the Trust. Otherwise the Trust would be the creditor. And if the Trust is not the owner of the loan as specified by the Prospectus and Pooling and Servicing Agreement, then it follows that it has no status at all, which means that neither the Trustee nor the servicer have any authority to manage, service or otherwise enforce the alleged loan. The entire strategy of asserting the Trust is a holder of the note is thus unhinged when it is confronted with reality. The whole “standing” argument revolves around this point — that no loan actually made it into any Trust. Many cases have been won by borrowers on that point without the extra step of saying that the creditor is completely unknown.

So the upshot is that there is no known, presumed or identified creditor. Although that seems implausible and counter-intuitive, it is nonetheless true. That doesn’t mean that theoretically there couldn’t be an unsecured claim from the investors to collect from the homeowner under a theory of unjust enrichment, but it does mean that the investors are neither named on the note and mortgage nor are they the current owners of any paper instruments that purport to be evidence of the “debt” — i.e., the note and mortgage. If they are not the current owners of the “debt” originated at closing nor the owners of the paper instruments signed at the alleged closing, then there is no evidence of any contract or privity between the investors and the Trustee or servicer at all. The PSA was ignored which means the entity of the Trust was ignored.  And THAT means lack of standing and lack of any ability to cure it.

Which brings me to one of my earliest articles for this Blog that announced “You Don’t Owe the Money.” Using the step transaction doctrine and single transaction doctrines arising mostly out of tax courts, it was plain as day to me back in 2007 and 2008 that there was no “debt.” And until someone stepped up with an equitable unsecured claim against the homeowner, there wasn’t even a liability. But nobody ever steps up. The banks tell us that is because the whole securitization scheme is to prevent and even prohibit the investors from even making an inquiry into any specific “loans.”

But the real reason is simple and basic — the Trusts were ignored, which means that investor money was deposited with investment banks under false pretenses — the falsehood being that the investors were buying into a specific Trust (which never received any proceeds of sale of the Trust securities) with a specific Mortgage Loan Schedule. The Mortgage Loan Schedule was therefore a complete illusion as an attachment to the Trust because the Trust never had the money to pay for the “pool” of loans. That is why the Mortgage Loan Schedule shows up mainly in litigation in order to confuse the Judge into thinking that somehow it is “facially valid” instead of being the self-serving fabrication of a stranger to the transaction who is engaged in stealing the loans after they already stole the money from investors.

In fact, the “pool” was an ever widening dark dynamic pool of money in which all the money of all investors was commingled with all the other investors of all the alleged Trusts. As I have previously stated the result can be compared to taking an apple, an orange and a banana and setting a food processor on Puree. At the end of that simple process it is impossible for the chef to produce the original apple, orange or banana.

If securitization was real, the banks could have easily done two things that would have completely knocked out any borrower defenses except payment. The first was to show the money chain and the second would be produce the proof that the Trust owned the debt, not the investors. The current talking points used by the Banks is that somehow the Trust can enforce the alleged loan even though it is the “investors” who own the loan. But that can only be true if the Trust owns the loan which it doesn’t. And naming the “investors” as the creditor does nothing to clarify the situation — especially when the “investors” cannot be identified.

As it stands now, the investors continue to allow the banks to act like they are really intermediaries, stealing both the money and the loans that should have been executed in favor of the investors and even allowing claims for collecting “servicer advances” that were not advances (they were return of investor capital) and never came from the servicer. It was and remains a classic PONZI scheme that government is too scared to do anything about and investors are too ignorant of the false securitization (or unwilling to admit human error in failing to do due diligence on the securitization package).

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FORECLOSURE DEFENSE: MEMO ON SINGLE TRANSACTION — DISCUSSION AT WORKSHOP IN SANTA MONICA

In the homeowner’s war, the battlefield is taking shape, A prime area of engagement is whether the securitization process represents a series of independent transactions (lender’s position) or that all the transactions should be aggregated (BORROWER’S POSITION) and treated as a single transaction.

For reasons explained more fully below, it is our opinion that the transactions should be aggregated into a single transaction under the three tests used by the courts to determine whether a tax event should be considered to have occurred.

Given the fraudulent and deceptive practices used before and at closing, plus the TILA and other violations, the single transaction would create only one possibility for a holder in due course out of all the “holders” in the chain — the investor who actually put up the money that was used to fund the loan.

We predict that there will be instances where the investor actually did know what was going on at the loan origination and loan closing stage and participated because of the temporary boost to the manager’s performance rating in a pension fund, hedge fund or other entity. Certainly these were all, by definition, “qualified investors” who by definition are presumed to have knowledge sophistication and access to information that the borrower did not have and could not have and which the parties intentionally concealed. Thus it is possible that investors, even if they were found, might not be able to sustain their burden of showing their clean hands. If so, they might be doubly challenging for anyone to locate and tie to a particular transaction — the information for which is within the sole care, custody and control of the participants in the chain of securitization.

However, due to pre-selling and fulfilling the requirements of the tranches AFTER investment, it is entirely possible that one investor actually put up the money that was loaned and eventually given to the Seller in a specific purchase transaction or a specific borrower in a specific refi, while another investor received delivery of a certificate of asset backed securities that were unrelated to the trail of money downstream to a particular transaction.

All other parties may have been “holders” but not holders in due course under the UCC, Article 3, since the bad behavior including fraud in the inducement and fraud the execution etc. travels with the instrument unless the holder can prove they were innocent and had no knowledge. Since these parties were in many ways so interrelated, intertwined, and co-owned or operated through common service agents, it is difficult to conceive how they would meet this challenge.

Under the binding commitment test, we look at whether there was a binding commitment to enter into a later agreement. This is determined by looking at the agreements of the parties in “privity” and by the conduct of the parties and their obvious intent. Clearly the intent of the mortgage broker was to initiate the mortgage application with the intent that it would be accepted by an originating lender, knowing that the loan was either pre-sold, or would be sold on the application terms, or would be sold after the loan documents themselves.

The very existence of “selling forward” presumes securitization and the existence of one or more investors at the other end of the chain, who probably were not told that they were buying loans that did not yet exist. In fact, it appears at least in some cases, that these investors were mislead in much the same way as the borrowers were down line. Many report, and some lawsuits filed by State and County authorities assert that ABS certificates were sold under the guise of securities that were ultra-short term, could not fluctuate in value and could be liquidated at par at weekly auction. See New York State Attorney General Andrew Cuomo and related suits.

Even where the loans were completed, the description of them was at variance with reality but the intent to convey and pledge an interest in the mortgage and note is clear from the behavior of the parties.
Dropping the underwriting and appraisal standards in order to satisfy the insatiable appetite of Wall Street for paper, regardless of how worthless it was, is also a clear indication that there was a commitment intended to be fulfilled. The behavior of the “lender” in creating high risk loans and masquerading them otherwise surely indicates that the “lender” did not perceive itself at risk, thus implying a continuing transaction in the chain wherein a third party would receive the risk.

The payment of 2.5% premium over the total amount of the mortgage, instead of the usual practice of discounting loans, together with the accounting treatment where these transactions were kept “off balance sheet” is a clear indication that they were providing a service in chain that was leading upward to investment bankers and investors.

Under the end result test the case gets even easier. The investor put up the money and the borrower signed the documents. Under the investor deal, it was backed by the borrowers’ signatures and under the loan documents, it was based on money that came from the investor.

Under the interdependence test the argument is complete. There would be no reason for any of the actions of any of the parties in the chain but for the investor purchasing securities with money that would be used for the loan. Nor would there have been any loan without the money from the investor. Had the investor funds not been the source, the underwriting, appraisal and closing standards would have complied with industry regulations and expectations.


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The step transaction doctrine is a rule of substance over form that treats a series of formally separate but related steps as a single transaction if the steps are in substance integrated, interdependent, and focused toward a particular result. Penrod v. Commissioner, 88 T.C. 1415, 1428 (1987). Because the Tax Court has applied the step transaction doctrine even where it did not find a sham transaction, this doctrine should be considered in addition to the economic substance argument discussed above. See Packard v. Commissioner, 85 T.C. 397 (1985).

In characterizing the appropriate tax treatment of the end result, the doctrine combines steps; however it does not create new steps, or recharacterize the actual transactions into hypothetical ones. Greene v. United States, 13 F.3d 577, 583 (2nd Cir. 1994); Esmark v. Commissioner, 90 T.C. 171, 195-200 (1988), aff’d per curiam, 886 F.2d 1318 (7th Cir. 1989).

Some lease stripping transactions may lend themselves to being collapsed. If so, the question is whether the transitory steps added anything of substance or were nothing more than intermediate devices used to enable the subsidiary corporation to acquire the lease property stripped of its future income, leaving the remaining rental expense and depreciation deductions to be used to offset other income. See Helvering v. Alabama Asphaltic Limestone Co., 315 U.S. 179, 184-185 (1942).

Courts have developed three tests to determine when separate steps should be integrated. The most limited is the “binding commitment” test. If, when the first transaction was entered into, there was a binding commitment to undertake the later transaction, the transactions are aggregated. Commissioner v. Gordon, 391 U.S. 83 (1968); Penrod, 88 T.C. at 1429. If, however, there was a moment in the series of transactions during which the parties were not under a binding obligation, the steps cannot be integrated using the binding commitment test, regardless of the parties’ intent.

Under the “end result” test, if a series of formally separate steps are prearranged parts of a single transaction intended from the outset to achieve the final result, the transactions are combined. Penrod, 88 T.C. at 1429. This test relies on the parties’ intent at the time of the transactions, which can be derived from the actions surrounding the transactions. For example, a short time interval suggests the intervening transactions were transitory and tax-motivated. A short time interval, however, is not dispositive.

A third test is the “interdependence” test, which considers whether the steps are so interdependent that the legal relations created by one transaction would have been fruitless without completing the series of transactions. Greene, 13 F.3d at 584; Penrod, 88 T.C. at 1430. One way to show interdependence is to show that certain steps would not have been taken in the absence of the other steps. Steps generally have independent significance if they were undertaken for valid business reasons.

In this transaction, the nature of B and C’s involvement may support the conclusion that steps involving B and C should be eliminated from the transaction. In this event, D could be required to recognize the accelerated income arising from the purported sale of the rent stream to the bank. Therefore, through the consolidated return, E would recognize the income, and thereby match the income with the deductions.

The “step transaction doctrine,” under which “interrelated yet formally distinct steps in an integrated transaction may not be considered independently of the overall transaction,” forms a vital part of our tax law.

The scope of this extra-statutory “doctrine” in particular cases can be quite uncertain; nevertheless, the parameters of its application in some transactional forms have become well-accepted and, in those cases, some certainty has been attained by taxpayers and the Internal Revenue Service (“IRS”) regarding which individual steps of a “larger” transaction would and would not be granted independent significance for tax purposes. In Revenue Ruling 2001-46 (October 15, 2001), however, the IRS arguably changed its approach to analyzing one common form of corporate asset acquisition, described below, under the step transaction doctrine.

An acquiring corporation (“X”) wishing to effect an acquisition of the assets of a widely-held target corporation (“T”) may form a wholly owned subsidiary (“Y”). Pursuant to an overall “plan,” Y will merge into T, with the shareholders of T tendering their T stock in exchange for cash, stock, or securities of X (or some combination thereof), following which T will merge into X.

Under longstanding guidance from the IRS, the “transitory steps” of the formation of Y and its merger into T were ignored; these transactions in which X became, at least momentarily, the sole shareholder of T were treated as an acquisition of T stock by X directly from the shareholders of T. By contrast, in analyzing the consequences of that “direct acquisition” of stock, the subsequent “upstream” merger of T into X was treated as a separate transaction, rather than as part of an overall “plan.”

The effect of this analysis was to permit, in those cases in which the portion of the consideration received by the shareholders of T which did not consist of stock in X was sufficiently preponderant, treatment of the acquisition as a “qualified stock purchase” and the making by X of an election under section 338 of the Internal Revenue Code (“Code”) to “step-up” the basis of T’s assets to X’s acquisition cost.

In Rev. Rul. 2001-46, however, the IRS held that all the steps described above, including the merger of T into X, would be treated as a single transaction, which could then be treated a statutory merger of T into X, if, under the circumstances, an actual merger of T into X would have qualified as a nontaxable reorganization under Code section 368(a)(1)(A).

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