2011 U.S. Tax Ct. LEXIS 42
Tax Ct.2011Background
- Petitioners Bergmann participated in SOS‑like tax shelters promoted by KPMG in 2000 and 2001.
- Greenberg, a KPMG partner, helped organize the SOS‑like transactions for clients and partners.
- The 2000 and 2001 transactions fell within the scope of KPMG’s Stratecon practice and were similar to a Notice 2000‑44 transaction.
- Respondent served Notice 2000‑44 summonses on KPMG in March 2002 concerning liability under §6700; Bergmann was not initially listed on the client roster.
- Petitioners filed a 2001 amended return in March 2004 reporting disallowed losses; respondent issued a deficiency notice for 2001 and 2002 with penalties; petitioners conceded a 20% accuracy‑related penalty if QAR was not filed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did petitioners file a qualified amended return for 2001? | Bergmann argued the promoter investigation did not terminate the QAR period. | Commissioner argued the promoter provision terminated the QAR period when respondent first contacted KPMG. | |
| No; the amended return was not a QAR. | |||
| Is the 2001 underpayment attributable to a gross valuation misstatement? | Petitioners contend the concession cannot support a gross valuation penalty due to lack of economic substance. | Commissioner argues the concession was based on grounds other than value or basis but still allowed gross valuation penalty if warranted. | No; petitioners are not liable for the 40% gross valuation penalty; 20% accuracy penalty applies. |
Key Cases Cited
- Sala v. United States, 100 AFTR 2d 2007-5097 (D. Colo. 2007) (promoter investigation timing not controlling in some circuits)
- Golsen v. Commissioner, 54 T.C. 742 (Tax Ct. 1970) (tax court follows circuit precedent when appealable to specific circuit)
- Keller v. Commissioner, 556 F.3d 1056 (9th Cir. 2009) (gross valuation penalty intertwined with tax avoidance schemes may be limited by circuit precedent)
- Petaluma FX Partners, LLC v. Commissioner, 131 T.C. 84 (2008) (gross valuation penalty analyzed where deductions fail due to lack of economic substance)