The IRS has litigated a number of cases in the Son-of-Boss tax shelters involving digital options on foreign currency described as listed transactions in Notice 2000-44. See, e.g., Jade Trading, LLC, 80 Fed. Cl. 11 (2007). IN the course of the litigation, the IRS has apparently collected a number of tax opinions relating to the shelters. One plaintiff partnership in its own Son-of-Boss tax shelter administrative proceeding relating to one of the shelters sold by (now defunct) Jenkens & Gilchrist sought to compel production of all such tax opinions (in redacted form) collected by the government, as well as names and addresses of law firms and accounting firms that the IRS knows has issued such opinions. (The IRS had already provided copies of two opinion letters that Jenkens & Gilchrist had issued for one of the parties--one of them was "nearly 150 pages" long.) See 3K Investment Partners v. Comm'r, 133 T.C. No. 6 (Sept. 3, 2009).
The partnership's position was that the tax opinion letters would provide evidence of a "general consensus of national law firms across the country" that would bolster the case that these tax shelters worked to achieve the tax reduction intended. As the court notes, this is the "everybody's doing it" defense--it is a claim that since lots of people were doing it, it must be ok that this particular partnership did it. The court makes short shrift of the claim. It rejected (in a footnote) "any suggestion" that the collected opinions represented a "general concensus" among tax advisers about the tax consequences of a Son-of-Boss transaction. Further, it noted that "Petitioner must establish the reasonableness of its position on the basis of the facts and merits of its own case....The legal analysis, conclusions, and recommendations that some tax advisers may have given other taxpayers are irrelevant to the reasonableness of the positions the partnership took on its return." IN addition, the fact that the partnership didn't know there were other letters (or what firms produced them) when it filed its return means that the partnership cannot now use those letters to establish that it was acting in good faith.
The court held the materials were neither relevant nor likely to lead to plaintiff's discovery of admissible evidence. The materials were also return information under section 6103(b)(2) and therefore not discoverable.
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