Free Proposed Findings of Uncontroverted Fact - District Court of Federal Claims - federal

Case 1:05-cv-00296-FMA

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Filed 11/28/2005

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS GRAPEVINE IMPORTS, LTD., and T-TECH, INC., as Tax Matters Partner Plaintiffs, v. UNITED STATES OF AMERICA, Defendant. § § § § § § § § § §

NO. 05-296T (Judge Allegra)

UNITED STATES' PROPOSED FINDINGS OF UNCONTROVERTED FACTS The United States proposes the following Findings of Uncontroverted Facts supporting the United States' Motion for Partial Summary Judgment filed herewith:

1.

Joseph and Virginia Tigue formed Grapevine Imports, Ltd. in March of 1996. Comp. ¶ 22. During 1999, Grapevine's general and tax matters partner was T-Tech, Inc., and its limited partners were Joseph J. Tigue and Virginia B. Tigue. See Grapevine 1999 Form 1065, attached as Gov. Ex. 5. T-Tech held a 1% interest, Joseph held 49.5% interest, and Virginia held a 49.5% interest. Id.

2.

In 1999, Joseph and Virginia Tigue executed a series of transactions that the IRS refers to as a Son of BOSS tax shelter transaction.1 a. They first caused their wholly-owned Limited Liability Companies, JJT (Joseph J. Tigue) Meandering Investments and VBT (Virginia B. Tigue) Meandering Investments, to open a short sale on December 9, 1999, by borrowing treasury securities worth $9,978,119 and selling those securities for $9,978,119 in cash.

See IRS Chief Counsel Notice 2003-020, IRS CCN CC-2003-020, available at 2003 WL 24016805 (June 25, 2003).

1

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Comp. ¶ 24-25. b. One day later, on December 10th, the Tigues caused JJT and VBT to contribute the sale proceeds and short-sale obligation (i.e., the obligation to return the borrowed treasury securities to the short-sale lender) to Grapevine in return for a combined 99% LP interest in Grapevine. Comp. ¶ 27-28. JJT and VBT appear to have assumed the Tigues' interests in Grapevine, but Grapevine's complaint does not explain how that assumption occurred. c. Grapevine then, on the same day, immediately satisfied the short-sale obligation by purchasing treasury notes for $10,000,003 and repaying those notes to the short-sale lender. Comp. ¶ 29-30. d. These short-sale transactions netted the Tigues a $21,884 loss.2

3.

About two weeks after the short sale transactions, on December 31, 1999, the Tigues caused JJT and VBT to sell their Grapevine partnership interests to an unrelated third party for $10,916,240. Comp. ¶ 31-32. JJT and VBT recognized a combined $45,077 loss from this sale by subtracting a combined $10,961,317 basis in the partnership interests from the $10,916,240 of proceeds. See Tigue 1999 Form 1040, attached as Gov. Ex. 1.

4.

The $45,077 loss flowed through to the Tigues' 1999 individual tax return. Id. The Tigues combined this loss with other unrelated losses to create a total 1999 individual loss of $973,087. Id.

2

$10,000,003 less $9,978,119 = $21,884. U.S. Proposed Findings of Fact Page 2 of 5

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5. 6.

The Tigues filed their 1999 Form 1040 on or before April 15, 2000. Comp. ¶ 84. Grapevine filed its 1999 Form 1065 on April 19, 2000. Grapevine 1999 Form 1065, attached as Gov. Ex. 5; Comp. ¶ 82.

7.

Neither Grapevine nor the Tigues disclosed on their 1999 tax returns the use of a Son of BOSS shelter transaction. Grapevine did attach the following statement to its 1999 Form 1065:

See Grapevine 1999 Form 1065, attached as Gov. Ex. 5. 8. The Tigues carried their 1999 loss forward to future years along with a $1,127,481 net operating loss carried forward from 1998. See Tigue 2000 Amended Form 1040, attached as Gov. Ex. 2. 9. In 2000, the Tigues accrued $730,161 of individual taxable income. Id. The Tigues reduced this taxable income to zero, however, by using the 1998 loss carryforward. Id. 10. The Tigues filed their original 2000 individual tax return on August 17, 2001. Comp. ¶ 86; Tigue 2000 Original Form 1040, attached as Gov. Ex. 7. 11. On June 19, 2003, the IRS issued a John Doe summons to the Tigues' tax consultants, Jenkens & Gilchrist. See Johnson Decl. with attached Summons, attached as Gov. Ex. 3. This summons requested information regarding Jenkens's Son of BOSS clients. Id. Six months after that date is December 19, 2003. 12. The Department of Justice subsequently initiated a summons enforcement action in the
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Northern District of Illinois because Jenkens initially resisted this summons. See United States v. Jenkens & Gilchrist, P.C., No. 03 C 5693, 2004 WL 1245802 (N.D. Ill. May 14, 2004. On May 14, 2004, a court in the Northern District of Illinois ordered Jenkens to honor the summons by May 17, 2004. Id. Jenkens eventually satisfied the summons by providing the United States with two groups of documents related to the transactions described in paragraph 2. See Indices of Tigue Documents Produced by Jenkens & Gilchrist to the United States, attached as Gov. Ex. 4. See also, Jenkens Opinion Letters issued to Joseph and Virginia Tigue, attached as Gov. Ex. 6; Comp. ¶ 42. 13. About seven months after that, on December 17, 2004, the IRS issued a Notice of Final Partnership Administrative Adjustment to Grapevine Imports' tax matters partner, TTech, Inc. See Grapevine Notice of Final Partnership Administrative Adjustment, attached to Comp. This FPAA adjusted Grapevine's outside basis by $10,000,000. Id. Respectfully Submitted,

/s/ Grover Hartt, III GROVER HARTT, III Attorney of Record Tax Division U.S. Department of Justice 717 N. Hardwood, Suite 400 Dallas, Texas 75201 (214) 880-9721 (Main) (214) 880-9741 (Fax) EILEEN J. O'CONNOR Assistant Attorney General MILDRED L. SEIDMAN Chief, Court of Fed. Claims Section CHRISTOPHER R. EGAN DAVID R. HOUSE Of Counsel
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CERTIFICATE OF SERVICE IT IS HEREBY CERTIFIED that service of the foregoing PROPOSED FINDINGS OF UNCONTROVERTED FACTS has been made on the 28th day of November, 2005, by mailing a copy thereof to: Todd Welty Meadows, Owens, Collier, Reed, Cousins & Blau, L.L.P 901 Main Street, Suite 3700 Dallas, Texas 75202

/s/ Grover Hartt, III GROVER HARTT, III

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