Monday, March 25, 2013

Supreme Court Will Decide Whether Bullshit Tax Shelters with Basis Overstatements Draw the 40% Penalty (3/25/13)

The Supreme Court has decided to accept cert on the split in the circuits on the issue of whether the 40% valuation / basis overstatement applies to bullshit tax shelters that fail in a number of ways other than just valuation / basis overstatement.  The Supreme Court docket page in the case, United States v. Woods, No. 12-562. is here.  The entry granting cert adds the following TEFRA partnership procedure issue:
In addition to the question presented by the petition, the parties are directed to brief and argue the following question: Whether the district court had jurisdiction in this case under 26 U. S. C. 6226 to consider the substantial valuation misstatement penalty.
I can't get excited about the TEFRA issue.  It is important, to be sure.  But, the principal issue is foisted on the Supreme Court by the Fifth and Ninth Circuits' stubborn insistence to grant relief to bullshit tax shelters with basis overstatements despite their own expressed doubts and the critical mass of circuit court opinions denying that relief. I guess, though, that the TEFRA jurisdictional issue could perhaps give the Court an opportunity to duck the merits issue, thus not resolving the conflict.  (I would think, however, that, if the Supreme Court ducked the issue, the Fifth and Ninth Circuits could still resolve the issue by moving to the majority view in the next cases presenting the issue; alternatively, the Supreme Court might resolve the split in some case that does not present a jurisdictional impediment (such as the case for which petition for certiorari was filed from a majority view case in Alpha I L.P. v. United States, No. 12-550, here.)

For good discussions of the split, see Gustashaw v. Commissioner, 696 F.3d 1124, 1136 (11th Cir. 2012), here; Crispin v. Commissioner, ___ F.3d ___, ___ n. 18 2013 U.S. App. LEXIS 3852 (3d Cir. 2013), here; ; AHG Investments LLC et al. v. Commissioner, 140 T.C. ___, No. 7 (2013), here (adopting this majority rule for the Tax Court in cases where the Circuit Court to which an appeal would be taken has not spoken); and  Jeremiah Coder, Self-Serving Concessions and Penalty Avoidance, 134 Tax Notes 1583 (Mar. 26, 2012).

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