Notice of Supplemental Authority Filed in Virginia Historic

On January 18, 2011, the taxpayers filed a Notice of Supplemental Authority, drawing the court’s attention to the Tax Court’s recent opinion in Historic Boardwalk Hall, LLC v. Commissioner, 136 T.C. 1 (Jan. 3, 2011). According to the taxpayers in Virginia Historic, the new Tax Court case involves many factual and legal issues similar to those in the instant case. We’ll have an analysis of the recent decision and its potential impact on the issues in Virginia Historic in the near future.

Oral argument is scheduled in Virginia Historic for January 25, 2011.… Read More

Briefing Completed in Castle Harbour (Again)

On October 15, 2010, the government filed its reply brief in TIFD III-E Inc. v. United States, No. 10-70 (2d Cir.) (“Castle Harbour”).  The brief is linked below.  For our prior coverage of the case, see here and here.

In its reply, the government contends that I.R.C. section 704(e)(1) is inapplicable to the facts of the case, and that the provision only applies in the family partnership context, where parties are related.  The government asserts that section 704(e)(1) was not intended to apply, and indeed has never before been applied (and upheld) to an arm’s length transaction between … Read More

Securities Loan Case Before the Ninth Circuit

Lately, the IRS has had a successful run of attacking transactions involving purported securities loans.  See Anschutz Co. v. Commissioner, 135 T.C. 5 (July 2010); Calloway v. Commissioner, 135 T.C. 3 (July 2010); Samueli v. Commisioner, 132 T.C. 4 (March 2009).  Two of the cases, Samueli and Anschutz, involve the construction of I.R.C. section 1058, which provides for non-recognition treatment of a loan of securities that meets the following criteria: (1) the loan agreement provides for the return of securities identical to the securities transferred; (2) the agreement provides for payments to the transferor of amounts … Read More

Reply Brief Filed in Virginia Historic

The government filed its reply brief in Virginia Historic Tax Credit Fund 2001, LLC v. Commissioner, No. 10-1333 (4th Cir.), on September 1, 2010.  The brief is linked below.  See our prior coverage of this partnerships/disguised sale case here and here and here.

In its reply, the government argues that the tax characterization of the investor transactions, i.e., whether the investments were equity contributions or merely the purchase of state tax credits, is subject to the de novo standard of review.  Accordingly, the government contends that the Tax Court’s determination that the taxpayers were bona fide equity investors … Read More

Schizophrenic Application of Tax Penalties (Part II)

The last post in this series discussed differences in procedural posture that cause differences in the application of penalties.  Court splits in how the various and sundry penalty provisions in the Code are applied is an even more confusing area.  The two principal confusions are in the areas of TEFRA and valuation misstatements.  We will deal with TEFRA in this post.

Partnerships are not taxpaying entities.  They flow income, losses, deductions, and credits through to their partners who pay the tax.  Nevertheless, since Congress enacted the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97-248, 96 Stat. … Read More

State of Virginia Weighs in Against the IRS in Virginia Historic

Virginia has filed an amicus brief in the Fourth Circuit in support of the taxpayers in the Virginia Historic case.  (See here and here for previous coverage of the appeal).  The brief focuses primarily on policy, arguing that Virginia created these tax credits to facilitate historic preservation and expected that partnership vehicles might be necessary for businesses and individuals to make use of the credits.  According to the Commonwealth, “the IRS’s aggressive position threatens the effectiveness of the program and its benefits for all Virginians.”  Although the amicus brief is light on analysis of the federal tax issues, it may … Read More

Appellees’ Response Filed in Virginia Historic

The Appellees filed their response brief yesterday in Virginia Historic Tax Credit Fund 2001 LP v. Comm’r, No. 10-1333 (4th Cir.) (linked below).  Our previous discussion of the case is here.

The government has advanced two basic arguments.  First, it argues that the partners of the state tax credit partnerships were not bona fide partners that made capital contributions; rather, the government contends, the alleged partners were, in substance, purchasers of state tax credits.  As such, the proceeds of these sales transactions are gross income to the partnerships, not non-taxable contributions to capital.  In making this argument, the … Read More

Tenth Circuit Reverses District Court in Sala

In a brief (and some might say terse) opinion, the Tenth Circuit has reversed the District Court in Sala v. United States, 552 F. Supp. 2d 1167 (D. Colo. 2008)  (decision linked below).  As many readers will recall, Sala was considered an outlier among the tax shelter cases litigated over the past few years, with the taxpayer winning at trial in a Son-of-BOSS case.  See our prior discussion of the case here.

Citing to Coltec Indus., Inc. v. United States, 454 F.3d 1340, 1356 (Fed. Cir. 2006), and Black & Decker Corp. v. United States, 436 F.3d 431, … Read More

Tenth Circuit Engaged in Lengthy Deliberation in Sala

In what is considered by many an anomaly among the so-called “Son-of-BOSS” cases, the IRS lost the trial of a refund claim before the United States District Court for the District of Colorado in 2008.  See Sala v. United States, 552 F. Supp. 2d 1167 (D. Colo. 2008).  As many readers are no doubt aware, “Son-of-BOSS” is the nickname given to a type of loss-generating transaction described in IRS Notice 2000-44 (“BOSS” stands for “Bond and Option Sales Strategy”).  In one variation of such transactions, a taxpayer both buys and sells options on a given position and then contributes … Read More

Briefing Underway in Castle Harbour Redux

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

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