December 13, 2011
In our earlier discussion of the disguised sale cases, we noted that the federal district court in New Jersey had issued an unpublished opinion in the GI Holdings case that applied the disguised sale rule of 26 U.S.C. § 707(a)(2)(B) to undo a transaction. We noted that there was not yet an appealable order in that case, but at some point an appeal to the Third Circuit was possible. It now appears that the case has been settled and will be formally dismissed in the coming weeks. Thus, there will be no appeal to the Third Circuit, and the Fourth Circuit’s recent decision in Virginia Historic (see our report here) remains as the sole appellate ruling on disguised sales.