Free Motion to Compel - District Court of Federal Claims - federal

Case 1:06-cv-00245-EJD

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IN THE UNTED STATES COURT OF FEDERA CLAIMS
Nos. 06-245T, 06-246T, and 06-247T

(Consolidated)

MURFAM FARS, LLC, §
By and Through Wendell H. Murphy Jr., §

a Partner Other Than Tax Matters Partner, §
§ PSM FARS, LLC, §

By and Through Stratton K. Murphy, §
§

a Parter Other Than Tax Matters Partner, §

MURPHY PORK PARTNERS, LLC, §
By and Through Wendell H. Murphy, Jr., §

a Partner Other Than Tax Matters Partner, §

~ §
,---

§ Plaintiffs, § § § §

UNITED STATES OF AMRICA, §

Defendant. §
PLAINTIFFS' OBJECTIONS AND RESPONSES TO THE UNITED STATES' INTERROGATORIES (NOS. 71 THROUGH 95)
Plaintiffs MURF AM Farms, LLC, PSM Fars, LLC and Murphy Pork Parners, LLC

(collectively, "Plaintiffs") hereby object and respond to the United States' Interrogatories (Nos.
71 though 95) as follows.

GENERAL OBJECTIONS
1. Plaintiffs object to all Interrogatories to the extent that they seek information

protected by the Attorney/Client Privilege, the Attorney Work Product Doctrine, the Tax
Practitioner Privilege under 26 U.S.C. § 7525, or any other applicable privilege.

PLAINTIFFS' OBJECTIONS AND RESPONSES TO THE UNITED STATES' INTERROGATORIES NOS. 71
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2. Plaintiffs object to all Interrogatories on the grounds that they request information

that is cumulative and duplicative of information previously provided by Plaintiffs to the United
States during discovery of this case.

SPECIFIC OBJECTIONS AND RESPONSES

INTERROGATORY NO. 71: State each factual or legal issues you contend are depending
upon the value of the options on their contribution date to MURF AM Fars, LLC; PSM Fars,
LLC and Murphy Pork Parners, LLC, describe all legal theories and principal facts (including
expert witness testimony) supporting your contention, and identify all principal documents that
support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a part to this litigation
without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.

INTERROGATORY NO. 72: If you contend the option transaction had a reasonable
possibility of profit in the hands of MURF AM Fars, LLC; PSM Fars, LLC and Murphy Pork

Partners, LLC, describe all legal theories and principal facts (including expert witness testimony)
supporting your contention and identify all principal documents that support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of
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.Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs
hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.
INTERROGATORY NO. 73: If you contend the amount of the fees relating to the COBRA

transaction paid to any third pary or the treatment of the same fees on the tax returs of the S

corporations, parnerships or individual parners, are at issue in this case, describe all legal
theories and principal facts (including expert witness testimony) supporting your contention and
identify all principal documents that support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.
INTERROGATORY NO. 74: If

you contend MURFAM Fars, LLC, PSM Fars, LLC and

Murphy Pork Parners, LLC were formed for a legal purpose under state law and are parnerships
in fact and not a factual sham, describe all legal theories and principal facts (including expert

witness testimony) for such contention, including any theories and factual support for any claim
that the partnerships were organized for other reasons than the sole purpose of avoiding federal

and state income taxes and identify all principal documents that support your contention.

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ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of

Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs
hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.

INTERROGATORY NO. 75: Assuming MURF AM Fars, LLC, PSM Fars, LLC and
Murphy Pork Parners, LLC were not formed and availed of for other than the sole purpose of
tax avoidance by arificially overstating basis in the parnership interest of its parners, describe
all legal theories and facts (including expert witness testimony) for your contention and identify
all principal documents that

support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of

Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs
hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories
or otherwise orders Plaintiffs to respond to this Interrogatory.
INTERROGATORY NO. 76: If you contend the purchase of the offsetting option transactions
and their contribution to MURF AM Fars, LLC, PSM Fars, LLC and Murphy Pork Parners,

LLC had economic substance and were not an economic sham, describe all legal theories and

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principal facts (including expert witness testimony) for such contention, and identify all
documents that support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of

Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs
hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.

INTERROGATORY NO. 77: If you contend the offsetting option transactions, viewed
objectively, had a reasonable possibility of profit (other than in the hands of MURF AM Fars,
LLC, PSM Farms, LLC and Murphy Pork Partners, LLC inquired about in Interrogatory No. 72),
describe all legal theories and principal facts (including expert witness testimony) supporting

your contention and identify all principal documents that support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of

Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs
hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.

INTERROGATORY NO. 78: If you contend that absent the tax benefits, there were
reasonable expectations that the LLCs or the purported parnerships would realize a profit in
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excess of the fees and transaction costs associated with the COBRA transactions, describe all
legal theories and principal facts (including expert witness testimony) supporting your contention
and identify all principal documents that support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.
INTERROGATORY NO. 79: If you contend the offsetting option transactions had a non-tax

business purpose other than the creation of income tax losses, describe all legal theories and
principal facts (including expert witness testimony) supporting your contention and identify all
principal documents that support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a part to this litigation
without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.
INTERROGATORY NO. 80: If you contend MURF AM Farms, LLC, PSM Fars, LLC and

Murphy Pork Partners, LLC had a non-tax business purpose, describe all legal theories and
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principal facts (including expert witness testimony) supporting your contention and identify all
principal documents that support your contention.

ANSWER: Plaintiffs, object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a part to this litigation
without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.
INTERROGATORY NO. 81: If

you contend MURFAM Fars, LLC; PSM Fars, LLC and

Murphy Pork Partners, LLC (as defined under §1.70l-2 of Income Tax Regulations) were not

formed and availed of in connection with a transaction or transactions in taxable year 2000, a

principal purpose of which was to reduce substantially the present value of its partners'
aggregate federal tax liability in a manner that is inconsistent with the intent of Subchapter K of
the Internal Revenue Code, describe all legal theories and principal facts (including expert

witnesses testimony) supporting your contention and identify all principal documents that
support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the

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event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.

INTERROGATORY NO. 82: If you contend that the obligations under the short positions
(written call options) transferred to MURF AM Fars, LLC, PSM Fars, LLC and Murhy Pork
Partners, LLC do not constitute liabilties for purposes of Treasury Regulation § 1. 752-6T, the

assumption of which by the partnership should reduce the purorted partners' bases in the
parnership, but not below the fair market value of the purported parnership interest, describe all
legal theories and principal facts (including expert witness testimony) supporting your contention
and identify all principal documents that support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a part to this litigation
without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.
INTERROGATORY NO. 83: If

you contend that MURFAM Fars, LLC, PSM Fars, LLC

and Murhy Pork Parners, LLC and their partners entered into the option(s) positions or
purchase the foreign currency or stock with a profit motive for purposes of § l65( c )(2), describe

all legal theories and principal factual support (including expert witness testimony) for such
contention, and identify all documents that support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation
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without leave of court or written stipulation under Rule 33 of the Rules of the Court of

Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs
hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.
INTERROGATORY NO. 84: If you contend that the offsetting (long and short) options are

"separate" positions and not in substance a "single" position, describe all legal theories and
principal facts (including expert witness testimony) supporting your contention and identify all
principal documents that support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of

Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs
hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.
INTERROGATORY NO. 85: What do you contend can be established under Section 723 as
the adjusted bases of the long call positions (purchased call options), and the adjusted bases of

any other contributions purportedly contributed by the parers to MURF AM Fars, LLC, PSM

Farms, LLC and Murphy Pork Partners, LLC, describe all legal theories and principal facts
(including expert witness testimony) supporting your contention and identify all principal
documents that support your contention.

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.ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a part to this litigation
without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.

INTERROGATORY NO. 86: If you contend that, in the cases of a sale, exchange, or
liquidation of MURF AM Farms, LLC, PSM Farms, LLC and Murphy Pork Parners, LLC, or the

partners' parnership interests, either the purported parnerships or their purported parners have
established that the bases of

the parners' parnership interest were greater than zero for purposes

of determining gain or loss to such partners from the sale, exchange, or liquidation of such
parnership interest, state what you contend the purported partnerships or the purported parners

have established the basis of the parnerships' or partners' partnership interest are, and describe
all legal theories and principal facts (including expert witness testimony) supporting your

contention and identify all principal documents that support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of

Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs
hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.
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INTERROGATORY NO. 87: If

you contend the step transaction doctrine is not applicable in

this case, requiring that the individual steps of the COBRA transaction be collapsed, describe all
legal theories and principal facts (including expert witness testimony) supporting your contention
and identify all principal documents that support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.
INTERROGATORY NO. 88: If

you contend MURFAM Farms, LLC, PSM Fars, LLC and

Murphy Pork Parners, LLC were used for other than the conduits to create an artificially inflated
basis in the purported partners' partnership interests, which inflated basis could, in tur, then be

allocated to property distributed to the purported subchapter S corporations upon the prearranged

dissolution of the purported parnerships, describe all legal theories and principal facts (including

expert witness testimony) supporting your contention and identify all principal docui:ents that
support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
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/-event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.

INTERROGATORY NO. 89: If you contend the creation of the disregarded entities, the
parnerships and the S corporations and the contribution of the long and short offsetting options
to the parnerships and the liquidation of the partnerships to the purported subchapter S

corporation were not prearanged and therefore canot be disregarded under the step transaction
doctrine, describe all legal theories and principal facts (including expert witness testimony)

supporting your contention and identify all principal documents that support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of
- Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.

INTERROGATORY NO. 90: If you contended in any attempt to obtain compensation or
damages from the promoters or other third paries in connection with your paricipation in the

COBRA transactions, that the documentation for the offsetting option transactions may not
reflect the reality of these transactions, describe all legal theories and principal facts (including

expert witness testimony) supporting your contention or that you presented to the promoters or

other third parties in pressing your attempt, and identify all principal documents that support
your contention.

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ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.
INTERROGATORY NO. 91: If you contend that the documentation for the offsetting option

transactions may not reflect the reality of these transactions, describe all legal theories and
principal facts (including expert witness testimony) supporting your contention and identify all
principal documents that support your contention.

.-

ANSWER: Plaintiffs obje"(~t to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.

INTERROGATORY NO. 92: If you contend that the partners, partnerships or disregarded
entities (LLCs) were at risk, in whole or in part, within the "at risk" rules of §465, for the short

option(s) sold to Deutsche Bank, state the amount you contend was at risk under the "at risk"
rules of §465 and describe all legal theories and principal facts (including expert witness

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testimony) supporting your contention and identify all principal documents that support your
contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.
INTERROGATORY NO. 93: If you contend the penalties asserted in the FP AA should not be
asserted, describe all legal theories and principal facts (including expert witness testimony)

supporting your contention and identify all principal documents that support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.
INTERROGATORY NO. 94: If

you contend MURFAM Farms, LLC, PSM Fars, LLC and

Murphy Pork Partners, LLC or their partners had a reasonable belief the positions taken on the
Form 1065 partnership returns and Form l120S Subchapter S returns were more likely than not

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the correct treatment of the tax shelter and related transactions, describe all legal theories and
principal facts (including expert witness testimony

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.
INTERROGATORY NO. 95: Do you contend that the COBRA transaction which you entered
into is not a "tax shelter" within the meaning of Section 6662(d)(2)(C)? If you contend that the

.--

COBRA transaction which you entered into is not a "tax shelter" within the meaning of Section
6662(d)(2)(C), describe all legal theories and principal facts (including expert witness testimony)
supporting your contention and identify all principal documents that support your contention.

ANSWER: Plaintiffs object to this Interrogatory on the grounds that the United States has

exceeded the 100 written interrogatories that it may serve upon a party to this litigation

without leave of court or written stipulation under Rule 33 of the Rules of the Court of
Federal Claims, and no such leave of court or stipulation has been obtained. Plaintiffs

hereby reserve their right to assert any additional objections to this Interrogatory in the
event that the Court grants the United States leave to propound additional interrogatories

or otherwise orders Plaintiffs to respond to this Interrogatory.

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Respectfully submitted,

By:

Joel N. Crouch Texas State Bar No. 05144220
M. Todd Welty

~ ~-Ú-

Texas State Bar No. 00788642 Michael E. McCue Texas State Bar No. 13494150 Anthony P. Daddino Texas State Bar No. 24036434 MEADOWS, COLLIER, REED, COUSINS & BLAU, L.L.P. 901 Main Street, Suite 3700 Dallas, Texas 75202
Telephone: (214) 744-3700

Facsimile: (214) 747-3732
jcrouchêmeadowscollier .com

tweltYêmeadowscoller. com mmccueêmeadowscollier.com
adaddinoêmeadowscollier .com

A TTORNEYS FOR PLAINTIFFS

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/_..--

CERTIFICATE OF SERVICE
I hereby certify that on this the 26th day of October, 2007, I served the foregoing

Plaintiffs' Responses to the United States' Interrogatories (Nos. 71 though 95) to counsel

listed

below via Federal Express.
David Steiner, Esq. United States Department of Justice Tax Division Civil Trial Section, Northern Region 555 Fourth Street, NW Room 7804 Washington, D.C. 20001
David.M.Steiner2(qusdoj .gov

~

Joel N. Crouch

:xJ (.0

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