Third Circuit Briefing Completed in Sunoco

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June 30, 2010

On March 5, 2010, the government filed its reply brief in its appeal from the Tax Court’s decision in Sunoco Inc. v. Commissioner, 122 T.C. 88 (2004), thus completing the appellate briefing.  The case raises a novel issue concerning the Tax Court’s jurisdiction to determine overpayment interest.  Sunoco filed a petition seeking redetermination of deficiencies for its 1979, 1981, and 1983 tax years.  In an amended petition, Sunoco reported that certain issues had settled but argued that the IRS had committed errors in calculating the interest on underpayments and overpayments arising out of those issues because it used incorrect … Read More

Briefing Underway in Castle Harbour Redux

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June 28, 2010

As many if not most tax practitioners are aware, Castle Harbour is the nickname of a partnership taxation case that has been the subject of a great deal of attention in recent years.  See TIFD III-E Inc. v. United States, 342 F. Supp. 2d 94 (D.Conn. 2004), rev’d, 459 F.3d 220 (2d Cir. 2006).  The case involved a partnership arrangement that allocated 98% of the taxable income derived from fully depreciated aircraft leases to two foreign banks, even though the banks received only a relatively meager debt-like return on their partnership interests.  The IRS attacked the structure on … Read More

D.C. Circuit Considers Work Product Issues in Deloitte

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June 22, 2010

The Supreme Court’s recent denial of certiorari left intact the First Circuit’s en banc decision in United States v. Textron, Inc., 577 F.3d 21 (1st Cir. 2009), holding that Textron’s tax accrual workpapers had not been created “in anticipation of litigation” and therefore were not entitled to work product protection.  The Supreme Court’s decision, of course, does not make Textron the law of the land, but rather leaves considerable uncertainty over whether other circuits will follow the First Circuit’s lead or instead place greater weight on a company’s interest in protecting from the IRS the company’s lawyers’ assessments of … Read More

Fourth Circuit Briefing Underway in Partnership Disguised Sale Case

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June 20, 2010

The Tax Court and the U.S. District Court in New Jersey recently issued the first two opinions construing I.R.C. section 707(a)(2)(B), which is somewhat remarkable given that the partnership disguised sale rules have been on the books since 1984. See Va. Historic Tax Credit Fund 2001 LP v. Comm’r, T.C. Memo 2009-295; United States v. G-I Holdings Inc. (In re: G-I Holdings, Inc.), 2009 U.S. Dist. LEXIS 115850 (D.N.J. Dec. 14, 2009).  The Government has appealed the Tax Court’s decision in Virginia Historic to the Fourth Circuit.

In Virginia Historic, the Tax Court rejected the IRS’s challenge … Read More