RJT INVESTMENTS X, LLC Tax Court's quick visit to the Son-of Boss store

Last April it was noted that the Tax Court had ruled against a taxpayer involved in a Son-Of- Boss case. It turned out the ruling was a one page order issued by Judge Laro. Judge Laro is one of the most respected judges on the United States Tax Court. Thus, a one page dispositive order as to a Son-of Boss case caught everyone’s attention. As suspected the case is now on appeal and the Government’s brief has been posted on Tax Analysts. See 2007 TNT 8-37.

The Government’s brief sets forth the issues as follows:

  1. Whether the Tax Court had jurisdiction to determine the partnership item components of the partner’s basis in his partnership interest in RJT.
  2. Whether the Tax Court had jurisdiction to determine that RJT was a sham, that it lacked economic substance, and that it was formed and/or used for tax avoidance purposes.

The reason for the issues being framed in such a narrow manner is according to the Government, the taxpayer conceded that the transaction had no economic substance and admitted that it would present no evidence in challenging the notice. Rather, according to the Government, the only issue was jurisdictional as the Court lacked jurisdiction over the sham issue and the issue over outside basis.

As they there are two sides to a story and we do await taxpayer’s version of the facts and the law to determine whether this case was worthy of the headlines it received from the IRS.

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