D. Robert AUTREY, Jr., an individual, et al., Plaintiffs-Appellees, Cross-Appellants, v. UNITED STATES of America, Defendant-Appellant Cross-Appellee.
No. 87-8916.
United States Court of Appeals, Eleventh Circuit.
Dec. 6, 1989.
889 F.2d 973
Jerry B. Blackstock, Powell, Goldstein, Frazer & Murphy, James W. Hawkins, William M. Ragland, Jr., Atlanta, Ga., for plaintiffs-appellees, cross-appellants.
Before KRAVITCH and CLARK, Circuit Judges, and HENDERSON, Senior Circuit Judge.
KRAVITCH, Circuit Judge:
I.
A. STATEMENT OF FACTS
Autrey is a Georgia lawyer and tax specialist. In the early 1980s Autrey organized four cattle breeding enterprises—Star Brangus Ranch, Inc., Sweet Autumn Land and Cattle Co., Inc., Cattle Enterprises, Ltd., and Circle BA Ranch, Inc. Autrey was the principal promoter of these enterprises, was an officer of each, and played a role in the day-to-day management of each as well.
Autrey promoted the cattle breeding program by means of private placement memoranda offered by each of the four corporations. Although each private placement memorandum on its face purports to offer “securities,” a close reading of the memorandum and the evidence adduced at trial reveals that investors were purchasing the actual breeding cows and entering into certain ancillary agreements.2 Each of the
The Star Brangus Ranch was characteristic of the cattle breeding investment programs.3 An investor would enter an agreement as a “Breeder” with Star Brangus, which would act as a “Rancher.” A typical investor would make an investment of $100,000, $2,000 of which would be cash and the remaining $98,000 would be in the form of a seven-year recourse promissory note. Under the terms of the promissory note the investor would pay nine percent interest for the first four years, i.e., $8,820, in four equal quarterly installments per year, and would pay off the principal in the fifth, sixth, and seventh years ($57,952, $19,000, and $21,048, respectively).
For his money, the investor purchased a breeding herd or “unit” of six mother cows. As part of his investment, an investor would also enter into a Cattle Breeding Agreement and a Calf Option Agreement. Under the Cattle Breeding Agreement the Rancher would take possession of a Breeder‘s cows and “furnish the bulls and/or the semen and [would] breed the Breeder‘s cows in accordance with a planned professional breeding program.” The Cattle Breeding Agreement also gave the Breeder the right to have any cow in his herd that became barren replaced with one of equal or greater value. As appellees observe, this right of substitution was essentially a warranty as to the fertility of the cows.
The Breeder/investor was obligated under the Cattle Breeding Agreement to pay the Rancher $1,000 per breeding cow per year for maintenance. This maintenance fee, however, was not scheduled in annual payments; instead, the Breeder would pay $24,000 in the fifth year and $6,000 in the sixth year.
In the first year the Breeder would pay the Rancher an initial management fee of $3,700. Each year the Breeder would also pay the Rancher $720 for cattle insurance, $475 as an annual management fee, and $53 for membership in the Cattle Association.4
Under the Calf Option Agreement the investor had a “put” option to sell the calves to the rancher for a fixed price when the calves were two years old. Oddly, the “fixed price” for any calves was not related to the number of calves; it was simply set at $25,000 for a given year‘s “crop” of calves, regardless of how many calves were sold. The Calf Option Agreement was structured so that the Breeder had to take affirmative steps if he did not want to sell a year‘s calves to the Rancher. If the Breeder took no such steps, the calves would be sold to the Rancher, who would pay for the calves by means of a promissory note. The payments under the promissory note over the course of the agreement were scheduled so that they would largely balance the amounts owed by the Breeder to the Rancher under the breeding cow purchase promissory note.
| Offsetting Promissory Note Payments | ||||||||
|---|---|---|---|---|---|---|---|---|
| Description | 1983 | 1984 | 1985 | 1986 | 1987 | 1988 | 1989 | 1990 |
| Principal on $98,000 note | $57,952 | $19,000 | $21,048 | |||||
| “Maintenance” fees | $24,000 | $ 6,000 | ||||||
| Notes (plus accrued interest) under Calf Option Agreement | <$81,952> | < 25,000> | <$25,000> | |||||
| Net Cash Amount owed by Breeder to Rancher | -0- | -0- | < $3,952> | |||||
The net result of this is that the Breeder would not have to pay off the $98,000
It is curious that current maintenance expenses would be paid by promissory notes payable some years from when the Rancher in theory accrued the expenses. Although not necessary to our deciding the appeal at hand, viewed in toto, it appears that the “interest” on the $98,000 promissory note was in large part the actual maintenance fee. The so-called “maintenance fee” promissory notes were simply used to help off-set the principal obligation of the $98,000 promissory note.
If the Breeder decided to retain the calves, or to sell them to someone other than the Rancher, then the Rancher had an option to buy “at least” a one-third breeding interest (and, if applicable, semen interest) in any calf for a fixed price of $2,000 per one-third interest.5 Further, if the Breeder did not “put” the calves to the Rancher, the Breeder had to reimburse the Rancher for certain maintenance, insurance, and advertising costs associated with the calf. The Breeder would also have to reimburse the Rancher for “Artificial Insemination expenditures,” “Sire‘s semen,” etc.6
Under the terms of the Cattle Breeding Agreement, in the event of the Rancher‘s bankruptcy,
the Promissory Note for the original purchase of the cattle, given by the Breeder to the Rancher, shall be null and void as of the time the Rancher is adjudicated a bankrupt. Any Promissory Notes given by the Rancher to the Breeder for the purchase of any calves, and any accrued calf option amounts, under the terms of the Calf Option Agreement shall be null and void.
By the same token, if the Breeder was declared bankrupt
prior to the Breeder paying all sums due under the terms of the Promissory Note for the original purchase of the cattle, given by the Breeder to the Rancher, the Promissory Note shall be null and void as of the time the Breeder is adjudicated a bankrupt. Any Promissory Notes given by the Rancher to the Breeder for the purchase of any calves, and any accrued calf option amounts, under the terms of the Calf Option Agreement shall be null and void.
Thus, in the event of either party‘s bankruptcy, the house of cards made from the various promissory notes would conveniently vanish, relieving both parties of liability.
Although the cattle breeding programs were promoted as being profitable, the private placement memorandum, which Autrey authored, and the tax opinion letter he wrote and made a part of the private placement memorandum, detail the lucrative tax benefits an investor might enjoy. We need not go into every facet of the cattle breeding program, the largest tax benefits would flow from the depreciation and investment tax credit Autrey asserted would be available on the full $100,000 investment.
As described by Autrey, under then-applicable law, an investor would take the following Accelerated Cost Reduction System (“ACRS“) deductions as well as an Investment Tax Credit (“ITC“) over the five-year depreciable life of the cattle (assuming that the $100,000 is properly subject to depreciation):
| Year | ACRS | ITC |
|---|---|---|
| 1 | $14,250 | $10,000 |
| 2 | $20,900 | |
| 3 | $19,950 | |
| 4 | $19,950 | |
| 5 | $19,950 |
In addition, Autrey asserted that all the various annual expenses—e.g., mainte-
B. PROCEDURAL HISTORY
The Internal Revenue Service (“IRS“) determined that Autrey‘s cattle breeding program was an abusive tax shelter.
It appears that the first IRS appraiser valued a herd of six cows at $49,800. Two IRS agents, believing that this appraisal was too high for their purposes, asked the appraiser to change his conclusion. The appraiser refused, and the IRS agents destroyed the appraisal and secured another more to their liking.
On March 11, 1985 the IRS assessed Autrey and the cattle breeding enterprises penalties under
Autrey was also assessed $335,000 under
An IRS agent instructed Autrey that only one 15% payment for each “duplicate” assessment would be necessary under
The case was tried before a jury. There was conflicting evidence as to the value of the cattle and the ancillary benefits, such as the semen. The government requested the court instruct the jury that in determining whether the appellees had violated Answering special interrogatories, the jury found in favor of the appellees. The government appeals the district court‘s denial of the government‘s motion for judgment notwithstanding the verdict or new trial, citing as error the court‘s jury instruction. After the trial the government also renewed its argument—which it had made before trial—that the court lacked jurisdiction to entertain Autrey‘s claim for refund because he had not personally met the jurisdictional requirement of paying 15% of the assessed penalty. The district court concluded that Autrey had not met the statutory requirement, and thus ruled that it lacked jurisdiction to entertain Autrey‘s individual claim for refund. Autrey cross-appeals the trial court‘s decision. Appellees also cross-appeal the district court‘s conclusion that The Government‘s appeal focuses on the trial court‘s jury instructions. Whether the jury instructions, taken as a whole, correctly state the law is a question of law of which our review is plenary. Somer v. Johnson, 704 F.2d 1473, 1477-78 (11th Cir. 1983). We begin with the statutes under which appellees were assessed penalties. The IRS assessed penalties under § 6700. Promoting abusive tax shelters, etc. (a) Imposition of penalty.—Any person who— (1) (A) organizes (or assists in the organization of)— (i) a partnership or other entity, (ii) any investment plan or arrangement, or (iii) any other plan or arrangement, or (B) participates in the sale of any interest in an entity or plan or arrangement referred to in subparagraph (A), and (2) makes or furnishes (in connection with such organization or sale)— (A) a statement with respect to the allowability of any deduction or credit, the excludability of any income, or the securing of any other tax benefit by reason of holding an interest in the entity or participating in the plan or arrangement which the person knows or has reason to know is false or fraudulent as to any material matter, or (B) a gross valuation overstatement as to any material matter, shall pay a penalty equal to the greater of $1,000 or 20 percent of the gross income derived or to be derived by such person from such activity. (b) Rules relating to penalty for gross valuation overstatements.— (1) Gross valuation overstatement defined.—For purposes of this section, the term “gross valuation overstatement” means any statement as to the value of any property or services if— (A) the value so stated exceeds 200 percent of the amount determined to be the correct valuation, and (B) the value of such property or services is directly related to the amount of any deduction or credit allowable under chapter 1 to any participant. (2) Authority to waive.—The Secretary may waive all or any part of the penalty provided by subsection (a) with respect to any gross valuation overstatement on a showing that there was a reasonable basis for the valuation and that such valuation was made in good faith. (c) Penalty in addition to other penalties.—The penalty imposed by this section shall be in addition to any other penalty provided by law. Before proceeding further, we should dispose of one of appellees’ arguments. Appellees argue—strangely, as a part of their harmless error analysis—that penalties under First, we note that the applicable general definition of “person” includes corporations. See Liability may be imposed under At trial the government argued that penalties were properly assessed under either prong of In determining whether a person has made a gross valuation overstatement the finder of fact must first know what the subject of the “valuation” is in the first place, i.e., exactly what was being valued. It is undisputed that whatever was being valued, appellees gave “it” a valuation of $100,000. It is also undisputed that, at a minimum, “it” included the six breeding cows. The question is whether “it,” for the purposes of valuation, included anything else. From the private placement memorandum, it would appear that the $100,000 valuation was limited solely to the six breeding cows. The bill of sale is unambiguous on this point: The Rancher, STAR BRANGUS RANCH, INC., for and in consideration of the sum of One Hundred Thousand ($100,000.00) Dollars, consisting of a down payment in the amount of Two Thousand ($2,000.00) Dollars and a Promissory Note in the amount of Ninety-Eight Thousand ($98,000.00) Dollars, does hereby sell, bargain, convey, transfer and deliver to the Breeder all right, title and interest in and to the Brangus cattle described on Exhibit “BS“, hereto annexed and made a part hereto by reference. From this it would appear that the case is straightforward: was the valuation of the six breeding cows a gross valuation overstatement as that term is defined in Appellees, however, argue that the $100,000 valuation included many things in addition to the breeding cows themselves. For example, during the presentation of appellees’ case at trial, Autrey testified as follows: Q. Can you tell us what you as the drafter of the Bill of Sale and as the—in preparing this document for the cattle-breeding program intended to sell to the investors at the time as a part of the cattlebreeding program? A. They would be buying the cows; they would be buying the management in which to be able to breed these cows to the respective sires that were owned by the ranch; the use of the bull semen that would be the catalyst that would create the calves that would be born of their cows; the maintaining of these cows and calves in a breeding program in which the investor could get a profit; the taking if these calves being managed by our showmen [sic], at that point in time—well, just our showmen [sic] who did nothing but groom the cows, that‘s the only reason he was on the payroll, was to groom the calves so they could be placed in exhibition in shows. They received the ability to place any of their calves or cows in any of our sales, and we would market those calves and cows for them. Q. What if a cow turned out to be barren, that is, it would not produce a calf? Trial Transcript vol. 2 at 192-94. Seizing the bull by the horns, as it were, appellees direct our attention to Houchins v. Commissioner, 79 T.C. 570 (1982) and Grodt & McKay Realty, Inc. v. Commissioner, 77 T.C. 1221 (1981). Appellees argue that these cases show that when valuing a tangible asset, the value of associated intangible contract rights must also be included. We agree that Houchins and Grodt are instructive, but perhaps not in the way appellees would like. Both Houchins and Grodt involved investments in cattle breeding tax shelters, and in both, the taxpayers argued that the value of their investment included certain contract rights associated with the cattle themselves. In both cases the Tax Court considered the value of these contract rights, but concluded that these rights were valueless. Although Houchins and Grodt cannot stand for the proposition that intangible contract rights must add value to an associated tangible asset, nevertheless, we find Houchins and Grodt useful because they illustrate a simple truth: a valueless intangible contract right can add no value to an associated tangible asset. The items that appellees argue should be included—and which the government argues should not be included—fall into two categories. First, appellees argue that the $100,000 valuation included the value of high quality bull semen. Second, appellees argue that the $100,000 valuation in- Before considering each of the additional items that appellees assert went into the $100,000 valuation, we note that appellees’ good faith belief that an item gave additional value does not suffice under (A) the value so stated exceeds 200 percent of the amount determined to be the correct valuation, and (B) the value of such property or services is directly related to the amount of any deduction or credit allowable under chapter 1 to any participant. Whether a valuation statement “exceeds 200 percent of the amount determined to be the correct valuation,” is a mixed question of law and fact. The actual valuation statement made by a promoter is, of course, a factual issue—in this case it is undisputed to be $100,000. Yet, as we shall discuss, some things—as a matter of law—can add no value, and thus, cannot be a part of the “correct valuation” under In the context of the instant appeal, the six cows unquestionably have value, and thus the finder of fact must determine their correct valuation. Whether the value, if any, of a warranty, or semen, or management services, tangibles or intangibles, etc., may be included in the valuation is, on the other hand, a question of law. If, as a matter of law, any of those items may add some value, then it is within the province of the finder of fact to ascertain their We first address the one additional tangible asset that the appellees assert is properly included in the valuation. Before this court appellees assert, as they did below, that in addition to a breeding herd of six cows, an investor purchased “bull semen (a tangible asset) [that] was worth between $20,000 and $23,000.” For the reasons discussed below, we conclude that as a matter of law the bull semen could add no value to the investment. First, we note that appellees appear to overstate the case somewhat by claiming that the investor actually purchased a five-year supply of bull semen as a tangible asset which could be depreciated. There is no record evidence to suggest that the investors actually purchased and took title to any bull semen, frozen in liquid nitrogen, or otherwise. At the most, an investor actually purchased tangible semen for the first year of the cattle breeding program, and a right to a future supply of bull semen in subsequent years. Over the five years of the agreement the investor‘s cows would be impregnated by this semen. But the investor did not actually purchase a specific existing quantity of semen, nor was the semen itself “identified.” Indeed, the donor bull was not even identified. This clarification, however, is not necessarily dispositive of the question of whether the right to bull semen or actual bull semen itself may properly be included in the valuation. The answer to this question lies in the Calf Option Agreement. As noted above, if a Breeder elected to retain a calf or to sell it to someone Even if we posit that the investor purchased an option to buy a future supply of semen, that ersatz option cannot have added any material value to the investment because the price at which the Breeder would have to purchase the semen is, under the Calf Option Agreement, the actual cost. Thus, as a matter of law, the semen could not have added any value to the $100,000 investment. Appellees also argue that the investor “purchased” certain other intangible contractual rights, and that the value of these additional rights should be included in the valuation. We note that at this point we are not considering whether these intangibles are properly subject to the ITC and ACRS; instead, we are focusing solely on their economic value absent ITC and ACRS. Yet here again, because the contractual terms of those intangible rights required the investor (as Breeder) to pay for any benefits such as management services, the asserted additional value of these rights is chimerical. For example, as the excerpt of Autrey‘s testimony quoted above shows, appellees assert that the management and maintenance services the Rancher was obligated to provide under the Cattle Breeding Agreement added value to the investment. Yet, as noted above, the Cattle Breeding Agreement specifically required the Breeder to compensate the Rancher for those Before turning to the right of substitution, it is useful to consider where our analysis has brought us so far. As noted above, the private placement memorandum—in particular the bill of sale and promissory note, the Cattle Breeding Agreement, and the Calf Option Agreement—suggests that the $100,000 was solely for the purchase of the breeding cows. At trial, however, appellees in essence argued that the documents did not mean what they said, and that the investor was actually purchasing much more. Yet by making such arguments, the appellees ignored the inescapable legal consequences Whether the right of substitution—essentially a warranty as to the fertility of the cows—may add value to the investment is a slightly different issue. At trial the appellees argued that the market value of the six breeding cows did not include the value of this warranty, and that the warranty itself thus added additional value.10 With these observations in mind, we turn to the jury instructions given by the trial court. The government specifically requested that the court instruct the jury it could only consider the valuation of the cows themselves. The court, however, in- Autrey‘s actual cost of the breeding cows the investor purchased was about $24,096 per unit of six cows. The trial testimony as to the value of the cows ranged from $14,922 to $92,700 per herd. Because there was ample evidence to support a jury finding that $100,000 was a gross valuation overstatement, the error in the jury instruction was not harmless. We turn next to the government‘s alternative theory of liability under The first step under The next step is to determine whether that statement was “false or fraudulent.” There is no dispute that the six cows are properly subject to the ITC and ACRS. Thus, we must turn to the question of whether appellees’ statement on the availability of the ACRS and ITC on the other tangible and intangible assets was “false or fraudulent.” We first turn to appellees’ statement that the ACRS and ITC are available for intangible assets. Appellees have cited no authority for this proposition. Similarly, the availability of the ACRS was also specifically linked to tangible property. Under Appellees argue that Texas Instruments, Inc. v. United States, 551 F.2d 599 (5th Cir.1977) supports their assertion that intangible property can be “bundled” with tangible property, and the value of both can be subject to the ACRS and the ITC. First, we note that in Texas Instruments the issue before the court was not whether tangible or intangible assets are subject to the investment tax credit, or whether they could be bundled together. Instead, the issue was whether the value of the tangible assets—computer data tapes—included the cost basis of the collection of the seismic data stored on the tapes. The court ex- Appellees’ argument based on Texas Instruments may be reduced to the following syllogism: (1) Seismic data is intangible. (2) The value of seismic data is included in the tangible asset data tape. (3) Therefore, the value of intangibles may be included in the value of tangibles. Appellees ignore the essential facts that led the Texas Instruments court to its conclusion. Texas Instruments does not suggest that intangible assets are themselves subject to the ITC or ACRS. Moreover, Texas Instruments does not hold that the value of an intangible contract right may be “bundled” with a related tangible asset. Instead, Texas Instruments teaches that tangible property that is the physical incarnation of an intangible may include the cost basis of collecting or creating that intangible.19 “[The tapes] have intrinsic value because the seismic information thereon does not exist as property separate from the physical manifestation.” Id. Thus, in Texas Instruments itself, the depreciable cost of data tapes and films containing seismic data included the cost of obtaining that data. Similarly, the basis of a motion picture film may include the cost of “creating” the film. E.g., Walt Disney Productions v. United States, 549 F.2d 576 (9th Cir.1976). Appellees’ cattle breeding program is entirely different. Although the alleged in- Appellees have failed to suggest how the intangible rights involved in the cattle breeding tax shelter would fit under the rule of Texas Instruments, and they have also utterly failed to show how the intangible contract rights involved are any different from all other contract rights, which are not subject to the ITC or ACRS, a point on which the law has long been settled. By no stretch of the imagination can we fit appellees’ cattle breeding program within Texas Instruments.20 Thus, we conclude that as a matter of law, appellees’ statements as to the allowability of the ACRS and ITC with respect to the intangible aspects of the cattle breeding program were false. We also observe that these statements were unquestionably “material.” The next step under On remand, the court must instruct the jury under The first step is to determine the statement made as to the allowability of a deduction or credit. If the jury concludes that, as appellees assert, the statement was that the $100,000 investment included the value of the cows and the ancillary intangible contract rights, and that all would be properly subject to the ITC and ACRS, the court must instruct the jury that the statement as to the allowability of the ACRS and ITC for the intangible aspects of the investment was false for the purposes of The IRS also assessed penalties under § 6701. Penalties for aiding and abetting understatement of tax liability (a) Imposition of penalty.—Any person— (1) who aids or assists in, procures, or advises with respect to, the preparation or presentation of any portion of a return, affidavit, claim, or other document in connection with any matter arising under the internal revenue laws, (2) who knows that such portion will be used in connection with any material matter arising under the internal revenue laws, and (3) who knows that such portion (if so used) will result in an understatement of the liability for tax of another person, shall pay a penalty with respect to each such document in the amount determined under subsection (b). (b) Amount of penalty.— (1) In general.—Except as provided in paragraph (2), the amount of the penalty imposed by subsection (a) shall be $1,000. (2) Corporations.—If the return, affidavit, claim, or other document relates to the tax liability of a corporation, the amount of the penalty imposed by subsection (a) shall be $10,000. (3) Only 1 penalty per person per period.—If any person is subject to a penalty under subsection (a) with respect to any document relating to any taxpayer for any taxable period (or where there is no taxable period, any taxable event), such person shall not be subject to a penalty under subsection (a) with respect to any other document relating to such taxpayer for such taxable period (or event). .... (f) Penalty in addition to other penalties.— (1) In general.—Except as provided by paragraph (2), the penalty imposed by this section shall be in addition to any other penalty provided by law. (2) Coordination with return preparer penalties.—No penalty shall be assessed under subsection (a) or (b) of section 6694 on any person with respect to any document for which a penalty is assessed on such person under subsection (a). The jury‘s determination of appellees’ liability under The appellees cross-appeal the trial court‘s determination that it lacked jurisdiction to entertain Autrey‘s individual claims for refund because he had not met the statutory requirements for seeking a refund in the district court. Under § 6703. Rules applicable to penalties under sections 6700, 6701, and 6702 (a) Burden of proof.—In any proceeding involving the issue of whether or not any person is liable for a penalty under section 6700, 6701, or 6702, the burden of proof with respect to such issue shall be on the Secretary. (b) Deficiency procedures not to apply.—Subchapter B of chapter 63 (relating to deficiency procedures) shall not apply with respect to the assessment or collection of the penalties provided by sections 6700, 6701, and 6702. (c) Extension of period of collection where person pays 15 percent of penalty.— (1) In general.—If, within 30 days after the day on which notice and demand of any penalty under section 6700, 6701, or 6702 is made against any person, such person pays an amount which is not less than 15 percent of the amount of such penalty and files a claim for refund of the amount so paid, no levy or proceeding in court for the collection of the remainder of such penalty shall be made, begun, or prosecuted until the final resolution of a proceeding begun as provided in paragraph (2). Notwithstanding the provisions of (2) Person must bring suit in district court to determine his liability for penalty.—If, within 30 days after the day on which his claim for refund of any partial payment of any penalty under section 6700, 6701, or 6702 is denied (or, if earlier, within 30 days after the expiration of 6 months after the day on which he filed the claim for refund), the person fails to begin a proceeding in the appropriate United States district court for the determination of his liability for such penalty, paragraph (1) shall cease to apply with respect to such penalty, effective on the day following the close of the applicable 30-day period referred to in this paragraph. The code refers to a 15% payment by “any person” on whom notice and demand are made. The “duplicate assessments” were made against both Autrey and the corporate entities, all of whom are “persons” for this purpose. Accordingly each entity was required by the statute to pay 15% of the penalty in order to preserve the district court‘s jurisdiction. Autrey argues that because an IRS agent told him that only one payment was required for each “duplicate assessment” the government should somehow be estopped from asserting lack of jurisdiction. It is too late in the day to argue that estoppel may confer jurisdiction on a court of limited jurisdiction, be those limitations based on constitutional or statutory grounds. Autrey also argues that the issuance of “duplicate” assessments is itself not authorized by the Code. By making this argument, however, Autrey fails to grasp that the district court lacked jurisdiction to entertain such a challenge to the validity of the assessment. As the district court so succinctly noted, Autrey “may not by-pass the jurisdictional prerequisite by attacking the validity of the assessment.” Appellees also cross-appeal from the district court order denying their motion for litigation costs. Under We conclude with an admonitory note. In this opinion we have not sought to chart the course for some future promoter of cattle breeding as a tax shelter. Rather, we have simply decided the case at hand. As this case so well illustrates, the promoter of a tax shelter who tries to avoid the mistakes made by others may unwittingly fall into new ones of his own making. And that is how it should be. Discussing another provision of the Internal Revenue Code aimed at curbing abuse, Judge Raum observed that “Congress was obviously fed up with widespread abusive practices.” Hans S. Mannheimer Charitable Trust v. Commissioner, 93 T.C. 35 (1989). We believe the AFFIRMED IN PART, REVERSED IN PART and REMANDED WITH INSTRUCTIONS. CLARK, Circuit Judge, concurring in part and dissenting in part: The majority‘s analysis of this complex case is seemingly logical, but incomplete. There is no doubt that the investment programs created by Mr. Autrey offered incredible tax benefits to investors based on a small cash outlay. The programs arguably contain several of the classic elements of the very types of abusive tax shelters Congress intended to discourage by assessing civil penalties against promoters under Although from the very beginning the focus of this case has been on Mr. Autrey, the majority finds that the district court correctly held that the jury‘s verdict in favor of Mr. Autrey with respect to the four “duplicate assessments” in this case was invalid. On this issue the majority ignores ramifications of its decision that are clearly inconsistent with the law. I therefore respectfully dissent. I concur in the result reached by the majority with respect to the plaintiffs’ claims for litigation costs under In this case the government appeals from a jury verdict in favor of the plaintiffs, D. Robert Autrey, Jr., an individual, and Star Brangus Ranch, Inc., Sweet Autumn Land and Cattle Co., Inc., Cattle Enterprises, Ltd. and Circle BA Ranch, Inc. (the “corporate plaintiffs“). Mr. Autrey owns 50% of the stock of Cattle Enterprises, Ltd., and 100% of the stock of the other three corporate plaintiffs. In March of 1985 the IRS sent letters to the plaintiffs notifying them of assessments for penalties under three different sections of the Mr. Autrey and the corporate plaintiffs made the appropriate claims for refund, which the IRS denied. Mr. Autrey and the corporate plaintiffs then timely filed an action for refund in the district court, and after a lengthy trial the jury found in favor of the plaintiffs on all of the assessments. After the verdict, the government made a motion for a judgment notwithstanding the verdict, in which it renewed its argument that the district court did not have jurisdiction to entertain Mr. Autrey‘s claim for refund with respect to the four “duplicate assessments“. Specifically, the government argued that because only one 15% prepayment had been made for each of those assessments, and those prepayments had been credited to the corporations, Mr. Autrey had not met the jurisdictional prerequisite of In its analysis of the district court‘s jury instruction regarding how the jury was to determine whether the plaintiffs had made a gross valuation overstatement with respect to the cattle breeding investments, the majority concludes that the jury should have been instructed to consider only the value of the cattle because the other aspects of the investment plan do not, as a matter of law, add value to the investment. I cannot agree with this conclusion because it is legally incorrect and ignores the economic substance of the transactions. With respect to the alternate theory of liability under structions relating to section 6700 proffered by the government to have been grossly erroneous, and because the district court gave instructions relating to sections 6700, 6701 and 6694 that adequately explained the law, I must dissent from the majority‘s decision to remand the issues of Mr. Autrey‘s liability under sections 6701 and 6694. In support of its position, the government points to the bill of sale, which indicates that in return for $100,000 the investor received “all right, title and interest” in a herd of six cows. This argument, which the majority adopts, improperly ignores the reality of the underlying transaction. Gregory v. Helvering, 293 U.S. 465, 55 S. Ct. 266, 79 L. Ed. 596 (1935) (Establishing that the economic substance of transactions, rather than their form, is controlling for federal tax purposes.) The Bill of Sale is only one of several documents involved in these transactions. The Private Placement Memorandum summarizes the provisions of the Agreements that each investor entered into simultaneously with the transfer of title to each herd of six cows. The Summary of the Offering in the Private Placement Memorandum describes the securities being offered as “[a] Breeding Herd consisting of 6 cows or heifers, which include management contracts for the maintenance of the cattle....” Plaintiffs’ Exh. 123, R.O.A. Vol. 4, Tab 43. The Summary goes on to explain that “[t]he Investors will enter into a cattle breeding program where the Issuer will manage the purchased cattle, the substitute cattle and the offsprings. The cattle breeding program is commenced by an Investor executing a Cattle Breeding Agreement, a Calf Option Agreement and a Full Recourse Promissory Note with the Issuer.” Id. Samples of the Agreements were attached to each Private Placement Memorandum. In holding that the jury should have been instructed to consider only the fair market value of the cattle in determining whether the plaintiffs had made a gross valuation overstatement, the majority reasons that, as a matter of law, the rights each Investor had under the Agreements do not add value to the investment. This holding directly contradicts well established precedent that determinations of value are a matter of fact to be decided by the jury. Laird v. United States, 556 F.2d 1224, 1239 (5th Cir. 1977), cert. denied, 434 U.S. 1014, 98 S. Ct. 729, 54 L. Ed. 2d 758 (1978) (“[T]he valuation of assets is a factual finding....“); Anderson v. Commissioner, 250 F.2d 242, 249 (5th Cir. 1957), cert. denied, 356 U.S. 950, 78 S. Ct. 915, 2 L. Ed. 2d 844 (1958); Silverman v. Commissioner, 538 F.2d 927, 931 (2d Cir. 1976). The majority cites two Tax Court cases, Houchins v. Commissioner, 79 T.C. 570 (1982) and Grodt & McKay Realty, Inc. v. Commissioner, 77 T.C. 1221 (1981), in support of the proposition that as a matter of law “a valueless intangible contract right can add no value to an associated [investment in a herd of breeding cattle].” At 981. The holdings in Grodt and Houchins do not support this proposition for two reasons. First, the majority‘s analysis of these cases ignores the fact that the Tax Court sits as the trier of both law and fact. The Tax Court does not state in either case that its findings regarding the value of the agreements in those cases was a finding of law. Instead, in Houchins the Tax Court explains its decision regarding the value of the agreements by commenting on the lack of persuasiveness and credibility of the plaintiff‘s expert witness. 79 T.C. at 592. Moreover, in both cases the Tax Court states that it cannot place a value on certain agreements because the plaintiffs failed to make any attempt to value the agreements individually as components of the investment unit. Houchins, 79 T.C. at 592; Grodt, 77 T.C. at 1239 n. 20. Unlike the plaintiffs in Houchins and Grodt, the plaintiffs in this case did present evidence regarding the value of the five year supply of bull semen (approx. $21,000), R.O.A. Vol. 11, p. 54, Vol. 12, p. 164, Vol. 13, p. 194, 221, Vol. 14, p. 78-82, 227, and the value of the right to have fertile cows substituted for infertile cows (approx. $10,000), R.O.A. Vol. 11, p. 54. Secondly, in both cases the Tax Court was analyzing cattle breeding programs to determine whether the investors were purchasers in bona fide arm‘s length sale transactions. In deciding whether true sales had taken place, the Tax Court looked to see whether the fair market value of the cattle was approximately equal to the purchase price. Like Mr. Autrey and the corporations, the taxpayers in both cases argued that the purchase price they paid included more than the fair market value of the cattle. Specifically, they argued that the investment included the value of certain warranties and transportation expenses in addition to the value of the cattle. The Tax Court reasoned that because the evidence showed it was standard practice in the industry to offer these warranties to purchasers of cows, and for brokers not to charge transportation costs to the purchaser, the value of these warranties and transportation costs was already included in the market price. Therefore, the Tax Court concluded, these warranties and prepaid expenses added nothing to the established market value, which the Tax Court found to be substantially below the price paid by the taxpayers. Houchins, 79 T.C. at 593; Grodt, 77 T.C. at 1239. This conclusion, however, does not mean that the Tax Court found the warranties and prepaid expenses to be valueless as a matter of law. Instead, the Tax Court found that the evidence showed that the value of these items was already included in the market price of the cattle, and therefore did not represent value in addition to the fair market value of the cattle. Neither the majority nor the government rely on evidence that the value of a five year supply of bull semen, the right of substitution, and other intangible contract rights are customarily included in the purchase of breeding Brangus cattle such that their value is already factored into the market price of the cattle. Instead, the majority and the government argue that because the Investors were obligated under the Agreements to pay for bull semen and costs of insemination if the Investor elected to keep a calf instead of selling it to the Rancher, the right to bull semen and artificial insemination cannot be seen as part of the original $100,000 investment. Similarly, the majority and the government argue that the right of cow substitution only protects the Rancher, who is obligated to buy a “crop” of calves for $25,000, no matter how many calves are in the “crop“, and therefore the substitution rights offer no value to the Investor. The majority and the government also argue that because an Investor was obligated to pay for other intangible rights such as maintenance and care of the cattle and other management expenses such as accounting fees, these intangible rights add no value to the fair market value of the cattle. However, the plaintiffs offered evidence tending to show that an Investor‘s right to Similarly, the plaintiffs offered evidence that the right to have infertile cows replaced with fertile cows is valuable not only to the Rancher, as the majority points out, but also to the Investor. The evidence shows that cows are capable of breeding for a limited number of years, and that the older a cow is, the harder she is to breed. Under the Cattle Breeding Agreement, the Rancher had the right to substitute cows which were difficult breeders for more fertile cows. One witness testified that the Rancher would be motivated to substitute fertile cows because the Rancher would want to be able to buy as many calves as possible for the $25,000 purchase price agreed on in the Calf Option Agreement. This same witness noted, however, that the substitution was also valuable for the Investor because at the end of the breeding program the Investor would have a relatively young and fertile group of cattle to sell. A reasonable jury could conclude that in light of the evidence that fertile cows are more valuable than non-fertile cows, an Investor who owned six relatively young and fertile cows, whose prospects for breeding over several years were good, would be likely to get a better price for them than an investor who owned a group of older, and perhaps not all fertile cows. In its discussion of the “other intangibles“, the majority focuses on the testimony of Mr. Autrey that the maintenance and care of the cattle was a part of the investment. The majority correctly notes that these services were paid for separately by the $1,000 per year per cow maintenance fee. However, the record contains evidence regarding other benefits received by the Investors that are not included in the maintenance fee. For example, the Ranchers had the right to enter the Investors’ cattle in cattle shows. The plaintiffs introduced evidence that the Ranchers entered the cattle in shows and the cattle won numerous awards. Although the government made light of these awards at trial, there was evidence tending to show that these awards would do more for the Investors than inflate their pride as cattle owners. Several witnesses testified that the two most important qualities in valuing breeding cattle are pedigree and productivity (fertility). There was testimony to the effect that cows known to have a high quality ancestry command higher prices, and the way in which certain pedigrees become famous is by cattle being entered in shows and winning awards. Breeders pay attention to the pedigree of cows that win awards, and look for that pedigree when buying breeding cattle. Based on this evidence, a reasonable jury could conclude that having the cattle involved in a high quality breeding program which was developing a good reputation in the breeding community through winning awards at cattle shows added value to the investment in Furthermore, the fact that the Investors were obligated to pay for many of the services under the Agreements does not necessarily mean that the Investors interests in the contracts had no independent value. In Laird v. United States, 556 F.2d at 1224, the former Fifth Circuit allocated $3 million of the $7.5 million purchase price to the player contracts purchased by Atlanta Falcons owner Rankin Smith, Sr. in connection with his purchase of the NFL franchise. The court found that the contracts were “independent and uniquely valuable assets to the taxpayer.” Id. at 1233. Rankin Smith‘s obligation under the contracts to pay the players for their services did not render the rights that Mr. Smith had under those contracts valueless. Similarly, the jury was entitled to find that the rights the Investors enjoyed to continued maintenance and veterinary care of their herd of six cattle were uniquely valuable assets independent of the Investors’ obligations to pay set fees for those services over the five year period. The district court‘s instruction directing the jury to consider the value of the investment unit was therefore not an erroneous statement of the law. In answering special interrogatories number one and two the jury found that Mr. Autrey and the corporate plaintiffs had not overstated the value of the cattle investment program by more than 200 percent. I would affirm the jury‘s verdict on this issue, as there was ample evidence in the record to support the verdict. The plaintiffs argue that under the rationale of Texas Instruments, Inc. v. United States, 551 F.2d 599 (5th Cir. 1977), the value of the Cattle Breeding Agreement and the Calf Option Agreement may be “bundled” with the value of the cows, thereby making the full $100,000 investment subject to ACRS and the ITC. In Texas Instruments the court held that because the value of seismic data is entirely dependent on the existence of the tapes and film upon which it is recorded, the cost of collecting the data is properly included with the cost of the blank tapes and film when calculating the basis of the tapes and films for the purposes of the ITC and depreciation under I agree with the majority that the Texas Instruments rationale is inapplicable to the present case. The Agreements, unlike seismic data, do have an independent existence from the cows, the tangible property to which they relate. If an Investor did not own cows, but did enter into the Agreements, the Investor could assign the Agreements to someone else. The fact that the Agreements have no independent value to an Investor who does not own cows is immaterial. The holding of Texas Instruments is that because seismic data does not The court‘s analysis of the purchase of an NFL franchise in Laird is instructive. The court found that the taxpayer had properly allocated $50,000 of the $7.5 million purchase price to the non-depreciable franchise fee. The court also agreed with the taxpayer that the value of the player contracts should be treated as separate and distinct from the non-depreciable franchise fee, and allocated $3 million to the contracts to be subject to depreciation according to Treasury Reg. § 1.167. Laird v. United States, 556 F.2d at 1224. The Agreements entered into by the Investors are analogous to the player contracts purchased by the taxpayer in Laird and are properly considered to be separate and distinct from the Investors’ interest in the cows. Although Treasury Reg. § 1.167 allows a taxpayer to depreciate or amortize intangible assets with a useful life that can be estimated with reasonable accuracy, it allows the use of the methods prescribed in section 167, not section 168, the section containing the ACRS method represented by the plaintiffs as being the method under which investors could claim depreciation deductions. In fact, the legislative history of the ACRS states that intangible depreciable property is not “eligible property” under ACRS. General Explanation of the Economic Recovery Tax Act of 1981, Dec. 29, 1981 [Joint Committee Print] H.R. 4242, JCS-71-81 (LEXIS, Fedtax library, Legis file). Intangible depreciable property is also not eligible for the ITC. As the majority correctly states, the code describes property eligible for the ITC as certain tangible property. Having determined that a statement that the value of the intangible aspects of the cattle breeding programs may be included with the value of the cattle when calculating ACRS and ITC is a “false representation” under section 6700, the majority abruptly concludes its analysis of the appeal on this issue and orders a remand without analyzing the instructions given by the district court or the instructions requested by the government.2 Even if the district court‘s instructions do not contain completely accurate statements of the law, the government is not entitled to an automatic remand. In Pesaplastic, C.A. v. Cincinnati Milacron Co., 750 F.2d 1516, 1525 (11th Cir. 1985), this court held that “[i]f a requested instruction is refused and is not adequately covered by another instruction, the court will first inquire as to whether the requested instruction is a correct statement of the law. If [it is], the court will next look to see whether it deals with an issue which is properly before the jury. In the event both these standards are met, there still must be a showing of prejudicial harm as a result of the instruction not being given before the judgment will be disturbed.” (citations omitted) The government‘s requested jury charge number 8 stated: [Y]ou may find a plaintiff liable for making a false or fraudulent statement if you find that the plaintiff made or furnished to investors statements, in the offering materials or otherwise, that tax benefits such as investment tax credits and depreciation deductions could properly be calculated using the $100,000 figure as the cost or value of an investment unit, when the plaintiff knew or had reason to know that the statement was false or fraudulent because the cost or value of the cattle in an investment unit was not equal to $100,000. [I]f you find, for example, that the cattle in a given investment unit had a cost or value when the bill of sale was issued to the investor of an amount substantially less than $100,000, you must find that the plaintiffs knew or should have known that their statements as to the tax benefits available to investors on the basis of a $100,000 price per unit were false and fraudulent. Both of these instructions are grossly erroneous because they direct the jury to find the plaintiffs liable if they knew the value of the cattle was less than $100,000. To be found liable for making a false representation under The instructions proffered by the government would have essentially directed a verdict against the plaintiffs, because Mr. Autrey himself testified that he thought the six cattle in a unit were worth approximately $60,000 and that the right to a five year supply of bull semen, the cattle substitution rights and other intangible aspects of the program made an entire investment unit worth $100,000. Based on the government‘s proffered instructions, the jury could have found Mr. Autrey liable without considering whether he knew or should have known that the value of the intangible aspects of the program could not be included when calculating ACRS and the ITC. Mr. Autrey testified that he believed, based on his knowledge and research of the tax laws, that even if the cattle alone were not worth $100,000, the value of the intangibles could be included in calculating ACRS and the ITC. A proper instruction would have directed the jury to evaluate the credibility of this testimony before finding Mr. Autrey liable for making a false representation in violation of The government argues on appeal that the district court committed reversible error because its instructions did not clearly present the issue of whether Mr. Autrey knew or should have known that his “bundling” theory was not supported by the tax law. I agree that the court‘s instructions on this issue were not complete. However, the instructions proffered by the government also did not properly present this issue. Furthermore, at the charge conference the government‘s objections to the charges given by the court focused on the government‘s theory that the evidence showed that the plaintiffs represented that the cattle alone were worth $100,000, and that they knew this was false. The district court correctly rejected this theory, and the government did not explain that the court‘s instructions failed to inform the jury that even if it found that the value of an investment unit was $100,000, the plaintiffs could be liable for violating Under these circumstances, a reversal is authorized only if the district court committed plain error. Bissett v. Ply-Gem Indus., Inc., 533 F.2d 142 (5th Cir. 1976). In Bissett, the jury instruction requested by the defendant would have informed the jury that Florida law did not allow the plaintiff to recover for fraud if the defendant‘s statements were promises rather than statements of existing facts. The former Fifth Circuit found that this instruc In determining whether incorrect jury instructions resulted in a manifest injustice, this court takes into account the instructions in their entirety, the evidence presented, and the arguments of counsel to determine whether the jury was substantially misled and whether they understood the issues. See Iervolino v. Delta Air Lines, Inc., 796 F.2d 1408 (11th Cir. 1986), cert. denied, 479 U.S. 1090, 107 S. Ct. 1300, 94 L. Ed. 2d 155 (1987); Somer v. Johnson, 704 F.2d 1473 (11th Cir. 1983); Bissett, 533 F.2d at 142. The district court instructed the jury that it could find a plaintiff liable if it found that the plaintiff “made a representation to an investor with respect to the allowability of a tax deduction or credit, by reason of participating in the investment plan, that the plaintiffs knew or had reason to know was false or fraudulent as to a material matter.” R.O.A. Vol. 20, p. 157. Following this global instruction, the court gave some specific examples of the potential for liability, none of which included an example explaining the potential for liability with respect to Mr. Autrey‘s “bundling” theory. At trial, Mr. Autrey testified regarding his belief that the “bundling” theory was valid, and on cross-examination the government attacked that theory. The issue of Mr. Autrey‘s knowledge of the tax laws was argued to the jury. In closing argument, the plaintiffs stated: “We believe that the investors had the right to take the ITC credits and the depreciation. The status of the law in ‘82 and ‘83 authorized it. Bob Autrey researched it thoroughly and he seriously and sincerely believed it.” R.O.A. Vol. 20, p. 90-91. The government argued: “[There are] only two real questions to be decided by you in this case. One concerns the value of the property being sold. Depreciation and Investment Tax Credit can only be taken on a tangible personal property. Mr. Autrey‘s attempts to retrospectively categorize other items of the breeding programs as tangible personal property has been refuted.” R.O.A. Vol. 20, p. 126. The jury was made aware of the dispute over the “bundling” theory, and was instructed that it could find Mr. Autrey liable for making statements regarding deductibility that he knew or had reason to know were false or fraudulent. Under these circumstances, I find the members of the jury were sufficiently instructed so as to preclude any “substantial and ineradicable doubt as to whether [they] were properly guided in [their] deliberations.” Somer v. Johnson, 704 F.2d at 1478. I therefore dissent from the majority‘s decision to vacate the jury‘s verdict and remand this issue to be retried. I agree with the majority that the jury‘s determination of liability under The reasons for my disagreement with the majority‘s abrupt decision to remand the issue of liability for making a false representation in violation of After the jury returned its verdict in favor of Mr. Autrey and the corporate plaintiffs, the government renewed its argument that the district court lacked jurisdiction over Mr. Autrey‘s claims for refund related to the four “duplicate assessments” because only one 15% prepayment had been made for each “duplicate assessment” and those payments had been credited to the corporations.4 The majority‘s conclusion that the district court correctly held that it was without jurisdiction to decide Mr. Autrey‘s claim for a refund assumes, without explanation, that the “duplicate assessments” were in fact two separate assessments. At 988-989. Yet, as the government states in its brief, the real question raised by the plaintiffs’ cross-appeal is whether the IRS, in fact, made two assessments or only one. This question deserves more consideration than the unexplained, unsupported assumption made by the majority. The government admits in its brief that the evidence relevant to this issue is not “crystal clear” and that the “duplicate assessment” language on the notices sent to the plaintiffs “lends a note of ambiguity” to those notices. I agree with the majority that the government is entitled to assess penalties against both Mr. Autrey and the corporate plaintiffs. However, this means that when reviewing tax shelters for possible violations, the IRS is faced with a choice as to which promoters it will pursue. In this case the IRS sent assessment letters to the plaintiffs which the government admits were ambiguous. Autrey attempted to resolve the ambiguity when he contacted the IRS and asked the agent whether the “duplicate assessments” required one 15% payment or two.5 The “duplicate assessments” made in this case contain a latent defect that neither party has discussed. Each “duplicate assessment” relating to the four corporate plaintiffs indicated the same penalty amount for both Mr. Autrey and the individual corporation. For example, for activities relating to Star Brangus Ranch, Inc., the assessment notices sent to Mr. Autrey and to Star Brangus both indicated a penalty amount of $139,489. The government argues that this “duplicate assessment” means that Mr. Autrey and Star Brangus each owe the IRS $139,489, for a total of $278,978. Although both Mr. Autrey and the corporations can be penalized under The version of the cost of the cows sold to the investors, and then calculating 10 percent of that gross income amount. The government introduced no evidence of any separate calculation having been made with regard to the income derived individually by Mr. Autrey. Although Mr. Autrey owned 100% of the stock of three of the corporate plaintiffs and 50% of the stock of the fourth, the gross income he derived from the activities of the four corporations would not necessarily be equal to the corporations’ gross income. Mr. Autrey‘s gross income from the corporations’ activities would be equal to the dividends he received as a shareholder. The record does not reveal the amount of dividends paid by the four corporations in the relevant years, but common sense dictates that a corporation would not pay out its entire gross income in dividends. The plain language of the statute does not allow the IRS to assess penalties against Mr. Autrey based on the gross income derived by the corporations. Instead, the IRS may assess penalties against the corporations based on their gross income from the investments, and separate penalties against Mr. Autrey based on his gross income derived from his involvement in the investment plans. Of course, any liability of Mr. Autrey does not arise from his status as a shareholder, but from his personal involvement in the organization and promotion of the investments. Mr. Autrey has consistently maintained that the IRS has only made one assessment for the activities of each of the four corporations, and thus does not challenge on appeal the amount of the assessment that the government claims has been made against him individually. Nevertheless, the issue of the amount of the penalties allegedly assessed against Mr. Autrey must be addressed, as it relates to the ambiguous nature of the notices sent to the The statement by the IRS agent that only one 15% payment would be necessary constituted a choice by the IRS that the “duplicate assessments” would constitute four joint assessments against Mr. Autrey and each corporation with respect to the activities of the four corporations. Contrary to the assertions of the government, which the majority apparently accepts, this is not a case of a government agent making an incorrect statement of law which cannot bind the government. The “duplicate assessment” language on the notices received by the plaintiffs was ambiguous, and the government points to no law that supports the assertion that “duplicate assessment” means two separate assessments as opposed to one assessment against two parties. In fact, under the circumstances of this case, because the penalty calculations related only to the gross income of the corporations, the assertion that “duplicate assessment” means two separate assessments would be contrary to law, as it directly contradicts the plain language of the statute. The agent‘s statement that only one 15% payment would be necessary for the plaintiffs to seek a refund was therefore a statement of fact that the “duplicate assessment” language meant that the IRS was seeking only one penalty with respect to the activities of each of the four corporate plaintiffs.6 Notice to all persons of assessments under The answer to the real question posed by the plaintiffs’ cross-appeal, therefore, is that only one assessment was made. Although the IRS may have originally intended to make two assessments for the activities of each of the four corporate plaintiffs, the ambiguous manner in which it notified the plaintiffs confused even the IRS‘s own agents. It clearly violates concepts of minimal fairness to require taxpayers to read the IRS‘s mind when the IRS itself doesn‘t To avoid unfair prejudice to Mr. Autrey stemming from the ambiguous actions of the IRS, and to avoid finding that an assessment under The government also asserts that even if only one assessment was made, whether liability is joint or joint and several, all the plaintiffs are required to submit a 15% payment to satisfy the jurisdictional prerequisite. The government argues that its “substantial interest in protecting the public purse” justifies requiring both “persons” to make the 15% payment when the IRS makes a single “duplicate assessment” as it has in this case. Answering Brief of the United States as Cross-Appellee at 34, citing Flora v. United States, 362 U.S. 145, 80 S. Ct. 630, 4 L. Ed. 2d 623 (1960). While the legislative history of the tax code supports the government‘s argument that the 15% payment is intended to provide protection for the public purse, nothing in the history of The plaintiffs base their request for reasonable litigation costs on this highly questionable, pre-litigation conduct by officials of the IRS. This court recently rejected the argument that litigation costs may be awarded under For the foregoing reasons, I dissent, except as to the issue of litigation expenses. PER CURIAM: In view of the answer by the Supreme Court of Florida to our certified question, 548 So. 2d 1116, the judgment of the district court is AFFIRMED.II. THE GOVERNMENT‘S APPEAL
A.
1. Section 6700(a)(2)(B)—Gross Valuation Overstatement.
a. Bull Semen
b. Other Intangibles
c. Right of Substitution
d. Jury Instructions on Section 6700(a)(2)(B)
2. Section 6700(a)(2)(A)—False Representations.
a. The Statement
b. False or Fraudulent
c. “Knows or has reason to know”
3. On remand
B.
III. THE TAXPAYERS’ CROSS-APPEAL
1. Jurisdiction
2. Litigation costs
IV. CONCLUSION
I. Background
II. The Government‘s Appeal
A. Introduction
B. “Gross Valuation Overstatements”
C. “False Representations”
D. Sections 6701 and 6694
III. The Plaintiffs’ Cross-Appeal
A. Jurisdiction
B. Litigation Costs under Section 7430