March 31, 2011
On March 29, 2011, the Fourth Circuit rendered its opinion in Virginia Historic Tax Credit Fund 2001 LP v. Comm’r, No. 10-1333 (opinion linked below). As described in our previous coverage, the case involved an IRS challenge to the taxpayer’s treatment of partnerships used as marketing vehicles for state tax credits derived from historic rehabilitation projects. Agreeing with the government’s disguised sale theory, the court reversed the Tax Court and ruled that the transactions at issue were taxable sales of state tax credits, as opposed to non-taxable capital contributions followed by partnership distributions.
After quickly dispensing with the … Read More
January 19, 2011
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
September 4, 2010
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
August 11, 2010
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
July 27, 2010
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
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