Fifth Circuit Upholds Penalties in NPR

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January 31, 2014

The Fifth Circuit has finally issued its opinion in NPR (as reflected in our prior coverage, this case was argued almost two years ago), a case involving a Son-of-BOSS tax shelter in which the district court absolved the taxpayers of penalties.  The taxpayers were not as fortunate on appeal, as the Fifth Circuit handed the government a complete victory.

The court’s consideration of the two issues before the court of broadest applicability were overtaken by events — specifically, the Supreme Court’s December 2013 decision in United States v. WoodsSee our report here.  In line with that … Read More

Supreme Court Rules for Government on Both Issues in Woods

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December 3, 2013

The Supreme Court this morning ruled 9-0 in favor of the government on both issues in Woods, holding that:  (1) there is partnership-level TEFRA jurisdiction to consider the appropriateness of a penalty when the partnership is invalidated for lack of economic substance; and (2) the 40% valuation overstatement penalty can apply in that setting on the theory that the basis of a sham partnership is zero and therefore the taxpayers overstated their basis.  See our prior coverage here.  The opinion, authored by Justice Scalia, is concise and appears to resolve definitively both issues that had previously divided the … Read More

Supreme Court Struggles to Unravel TEFRA Jurisdiction in Woods Oral Argument

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October 11, 2013

The Supreme Court held oral argument in United States v. Woods on October 9.  As we have previously reported, the case presents two distinct questions:  (1) a TEFRA jurisdictional question concerning whether the court could determine the applicability of the valuation overstatement penalty in a partnership-level proceeding; and (2) the merits question whether the 40% penalty applied when the partnership was found not to have economic substance and therefore the basis claimed by the taxpayers in the partnership was not recognized.

Most of the argument time for both advocates was spent on the jurisdictional issue, as the Justices often … Read More

NPR Court Asks Parties for Additional Information on Jurisdictional Questions

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October 2, 2013

It has been almost two years since the Fifth Circuit heard oral argument in the NPR Investments case, which involves a “son-of-BOSS” tax shelter and associated questions regarding penalties and jurisdiction under TEFRA.  See our previous reports on the oral argument and describing the issues.  Last week, the court issued an order directing the parties to file short “letter briefs,” answering some specific questions involving TEFRA jurisdiction over penalties.  In particular, the court asked the parties to address how NPR compares to the Petaluma (D.C. Cir.) and Jade Trading (Fed. Cir.) cases in which the courts found a lack … Read More

Briefing Complete in Woods

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August 28, 2013

The government has filed its reply brief in the Supreme Court in Woods.  See our reports on the opening briefs here and here.  The discussion of the jurisdictional issue focuses less on the textual analysis set forth in the government’s opening brief and more on the policy implications of adopting the taxpayers’ position.  The government asserts that the taxpayers’ reading of the statute would effectively “negate Congress’s grant of authority to courts in partnership-level proceedings to determine the applicability of penalties.”

On the merits, the reply brief devotes most of its attention to responding to the taxpayers’ threshold … Read More

Taxpayers’ Brief Filed in Woods

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July 31, 2013

The taxpayers have filed their response brief in the Supreme Court in the Woods case, contending first that the courts lacked jurisdiction to impose the penalties requested by the IRS and, second, that, if jurisdiction exists, the Fifth Circuit correctly held that the valuation misstatement penalty could not be imposed.

On the jurisdictional point, the brief emphasizes the same basic point made by the courts that have questioned jurisdiction in similar partnership cases (see our previous report here) – namely, that the statute allows for partnership-level jurisdiction in a TEFRA proceeding only over a penalty that relates to adjustment … Read More

Supreme Court Briefing Underway in Woods on Penalty and TEFRA Issues

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June 5, 2013

The government has filed its opening brief in the Supreme Court in the Woods case, which involves whether the 40% gross valuation overstatement penalty applies in the context of a basis-inflating transaction held not to have economic substance.  See our earlier report here.

The government’s arguments on the question whether the penalty can be applied in these circumstances are similar to those discussed here previously and addressed in several court of appeals decisions.  It relies on the “plain text” of the statute, arguing that “[t]he word ‘attributable’ means ‘capable of being attributed’” and therefore a finding of lack of … Read More

Supreme Court Agrees to Hear Penalty Issue in Woods

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March 25, 2013

The Court this morning granted the government’s petition for certiorari in United States v. Woods, No. 12-562.  As we recently reported, the issue presented in the petition concerns the applicability of the valuation overstatement penalty — specifically, whether tax underpayments are “attributable to” overstatements of basis when the inflated basis claim has been disallowed based on a finding that the underlying transactions lacked economic substance.

The Court also added a second question for the parties to brief — “Whether the district court had jurisdiction in this case under 26 U.S.C. section 6226 to consider the substantial valuation misstatement … Read More

Taxpayer Seeks Supreme Court Review in Historic Boardwalk

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February 11, 2013

[Note:  Miller & Chevalier filed an amicus brief in the Third Circuit in this case on behalf of National Trust for Historic Preservation]

We have previously reported extensively (see previous reports here) on the Third Circuit’s decision in Historic Boardwalk denying a claim for historic rehabilitation tax credits by the private partner in a public/private partnership that rehabilitated a historic property on the Atlantic City boardwalk.  Although the Third Circuit declined to rehear the case, the taxpayer has now filed a petition for certiorari seeking Supreme Court review (docketed as No. 12-901).

With no conflict in the circuits on … Read More

Rehearing Denied in Historic Boardwalk

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October 23, 2012

The Third Circuit yesterday denied the taxpayer’s petition for rehearing en banc in Historic Boardwalk in what seems like record time (the petition was filed on October 10).  The taxpayer’s last hope is to seek Supreme Court review, though the case does not look like one that could pique the Court’s interest.  A petition for certiorari would be due on January 22.… Read More

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