Frank Lyon Co. v. United States

Holding

A sale-and-leaseback transaction with genuine economic substance and business purpose will be respected for tax purposes; the test looks at the multi-party realities and obligations of the transaction.

Facts

Frank Lyon Co. purchased a building from Worthen Bank under regulatory pressure and leased it back. The IRS challenged Lyon's ownership for tax purposes.

Reasoning

Justice Blackmun held that when there is a genuine multi-party transaction with economic substance compelled by business or regulatory realities, the legal form should be respected. The opinion articulated factors that became influential in subsequent substance-over-form analysis.