IRS Wins Battle Over Tax Shelter
Ruling on December 21, the United States Court of Federal Claims found in favor
of the Internal Revenue Service, announcing that the so-called 'Son of Boss'
tax shelter was an abusive scheme, and that any deductions claimed under it
should therefore be disallowed. The closely-watched case involved Jade Trading, which in 2003 took legal action
against the US tax authority after it ruled that millions of dollars in artificial
tax losses were not valid. Delivering her verdict on the matter earlier this month, Judge Mary Ellen Coster
Williams suggested, according to a New York Times report, that the losses being
claimed by Jade Trading's principal, Robert Ervin and his brothers, who were
his business partners at that time, were "purely fictional". "In sum, this transaction's fictional loss, inability to realize a profit,
lack of investment character, meaningless inclusion in a partnership, and disproportionate
tax advantage as compared to the amount invested and potential return, compel
a conclusion that the spread transaction objectively lacked economic substance,"
the Judge was further quoted by Reuters as observing. The decision is expected to have implications for other, similar cases, including
one involving Deutsche Bank. .
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