Free Notice of Additional Authority - District Court of Federal Claims - federal

Case 1:06-cv-00407-ECH

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS No.06-407T (into which have been consolidated Nos. 06-408T, 06-409T, 06-410T, 06-411T, 06-810T, 06-811T) Judge Emily C. Hewitt (E-filed: February 29, 2008) __________________________________________ ) ALPHA I, L.P., BY AND THROUGH ROBERT ) SANDS, A NOTICE PARTNER ) ) Plaintiff, ) ) v. ) No. 06-407T ) THE UNITED STATES, ) Defendant. ) __________________________________________) ) BETA PARTNERS, L.L.C, BY AND THROUGH ) ALPHA I, L.P., A NOTICE PARTNER ) ) Plaintiff, ) ) v. ) No. 06-408T ) THE UNITED STATES, ) Defendant ) __________________________________________) ) R,R,M & C PARTNERS, L.L.C., BY AND ) THROUGH R,R,M & C GROUP, L.P., A ) NOTICE PARTNER, ) Plaintiff, ) ) v. ) No. 06-409T ) THE UNITED STATES, ) Defendant. ) __________________________________________)

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Case 1:06-cv-00407-ECH

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__________________________________________ ) ) ) ) Plaintiff, ) ) v. ) ) THE UNITED STATES, ) Defendant ) __________________________________________) ) CWC PARTNERSHIP I, BY AND THROUGH ) TRUST FBO ZACHARY STERN U/A FIFTH G, ) ANDREW STERN AND MARILYN SANDS, ) TRUSTEES, A NOTICE PARTNER ) ) Plaintiff, ) ) v. ) ) THE UNITED STATES, ) ) Defendant. ) ) __________________________________________) ) MICKEY MANAGEMENT, L.P., BY AND ) THROUGH MARILYN SANDS, A NOTICE ) PARTNER, ) Plaintiff, ) ) v. ) ) UNITED STATES OF AMERICA, ) Defendant. ) __________________________________________) R,R,M & C GROUP, L.P., BY AND THROUGH ROBERT SANDS, A NOTICE PARTNER,

No. 06-410T

No. 06-411T

No. 06-810T

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__________________________________________ ) M, L, R & R, BY AND THROUGH RICHARD E. ) SANDS, TAX MATTERS PARTNER, ) ) Plaintiff, ) ) v. ) ) UNITED STATES OF AMERICA, ) Defendant. ) __________________________________________)

No. 06-811T

NOTICE OF RECENT AUTHORITY Please take notice that Plaintiffs are filing the following recent authority in further support of Plaintiffs' Cross-Motion for Summary Judgment: Jade Trading, LLC v. United States, 80 Fed. Cl. 11 (2007). A copy of the opinion is attached to this notice as Exhibit A. Plaintiffs believe Jade Trading is relevant to this Court's decision regarding Defendant's Motion for Summary Judgment and Plaintiffs' Cross-Motion for Summary Judgment for the reasons set forth below. In Jade Trading, the Court determined that the taxpayers literally complied with the Code where they determined that their bases in their partnership interests in Jade Trading, LLC increased by the value of purchased options they contributed to the partnership, but did not decrease by the value of the sold options assumed from them by the partnership. In so ruling, the Court determined that under Helmer v. Comm'r, 34 T.C.M. (CCH) 727 (1975), and its progeny, which were good law at the time the taxpayers entered the transactions at issue in the case, the sold call options assumed by Jade Trading, LLC would not be considered liabilities for purposes of Section 752 and that the taxpayers' reporting of their bases in the partnership complied with Section 752. The Court found that the taxpayers nevertheless were not entitled to the tax benefits claimed based on Coltec Indus., Inc. v. United States, 454 F.3d 1340 (Fed. Cir. 2006). Under the 1
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Court's reading of Coltec and its findings of fact in the case, the transactions at issue lacked economic substance. In the instant case, Defendant's Motion for Summary Judgment and Plaintiffs' CrossMotion for Summary Judgment concern whether Section 752 applies to disallow the tax benefits claimed by the taxpayers in this case. The recent opinion in Jade Trading supports Plaintiffs' view that the obligations to close the short sales that Alpha and Beta assumed were not liabilities under Section 752. Thus, the transactions at issue in this case, and Plaintiffs' reporting thereof, complied with the provisions of the Internal Revenue Code in effect at the time of the transactions. Additionally, because the Jade Trading case determined that the taxpayers complied with the literal requirements of the Internal Revenue Code, it is relevant to determining whether substantial authority or a reasonable basis for the positions taken by Plaintiffs existed.

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Respectfully submitted this 29th day of February, 2008.

s/ Lewis S. Wiener LEWIS S. WIENER Sutherland, Asbill & Brennan 1275 Pennsylvania Ave., N.W. Washington, D.C. 20004 Tel.: (202) 383-0140 Fax: (202) 637-3593 Email: [email protected]

Of Counsel: N. Jerold Cohen Thomas A. Cullinan Joseph M. DePew Julie P. Bowling Sutherland Asbill & Brennan LLP 999 Peachtree Street, N.E. Atlanta, Georgia 30309 (404) 853-8000 (404) 853-8806 (fax) Kent L. Jones Sutherland, Asbill & Brennan 1275 Pennsylvania Ave., N.W. Washington, D.C. 20004 Tel.: (202) 383-0732 Fax: (202) 637-3593 Attorney for Plaintiffs

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CERTIFICATE OF SERVICE IT IS HEREBY CERTIFIED that service of the foregoing Notice of Recent Authority has been made on February 29, 2008 via the Court's CM/ECF system to: Thomas M. Herrin Attorney, Tax Division Department of Justice 717 N. Harwood, Suite 400 Dallas, TX 75201 [email protected]

s/ Lewis S. Wiener LEWIS S. WIENER

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