Free Cross Motion [Dispositive] - District Court of Federal Claims - federal

Case 1:05-cv-00296-FMA

Document 38-11

Filed 11/28/2005

Page 1 of 12

Jenkens&Gilchrist
, A PROFESStONAL CORPORATION WASHINGTON. SUITE 2600 ILLINOIS 225 WEST cHICAGO, STREET 60606-3418' (312) 425-3900 FACSIMILE (312) 425-3909 . : ._ · * " '.. ; www.jenkens,com

AUSTIN. TEXAS (812) 498-3800 DALLAS, TEXAS (214) 885.4500 HOUSTON, TEXAS (713) 9.51-3300 LOS ANGELES, CALI_:ORNIA (310) 820-8800 SAN ANTONIO, TEXAS (210) 246-5000 WASHINGTON_ D.C. (202) 328-1500

January 31, 2000 CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED

---- -------- - ------------ -------------- ----Colleyville, Texas 76054 Dear Mr. Tigue: You have requested us to review the United States federal income tax consequences of a number of transactions in which you have been involved and to provide our opinion regarding certain material United States federal incorde tax issues. Such transactions are described below under the heading "Facts." In connection with this opinion, we have examined such matters of law, and such corporate and partnership records and such other agreements, certificates, instruments and documents, and we have made such other inquiries of officers, owners and representatives of the entities involved, as we have deemed necessary to render the opinions set forth herein. We have without any

investigation or independent confirmation relied upon and assumed the accuracy of the responses

CHICAGO

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GOVERNMENT EXHIBIT 6
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Case 1:05-cv-00296-FMA

Document 38-11

Filed 11/28/2005

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,
Mr. Joseph J. Tigue January 31, 2000 Page 2

Jenkens & Gilchrist
A PROFESSIONAL CORPORATION

to such inquiries and such certificates, corporate and partnership records and other documents with respect to factual matters. FACTS In particular, our opinion is based upon the following facts: 1. On December 9, 1999, you, through a Delaware limited liability company wholly
i'.

s

owned by you, JJT Meandering Investments LLC (hereinafter'referred

to as "JJTLLC"), engaged in

a transaction common!y referred to as a "short sale," in which you sold $5.0 million face value Treasury Notes maturing November 30, 2001; for $4,989,059.50 plus interest of $8,025.96, for total proceeds equal to $4,997,085.46." 2. .

On December 1(), 1999, you transferred the proceeds from the sale of the securities, to

together with the short Treasury Note position and $25,000.00 margin cash as a contribution capital of Grapevine Imports, Lid., a Texas limited partnership (the "Partnership"). to maintain additional margin in your account tosupport position went down in value. 3.

You continued

any losses in the event the short securities

On December 10, 1999, the Partnership closed its short securities position by buying

Treasury Notes in the market and "covering" its short position.

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Case 1:05-cv-00296-FMA

Document 38-11

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Jenkens & Gilchrist
A PROFESSIONAL CORPORATION

Mr. Joseph J. Tigue January 31, 2000 Page 3 OPINION Based on the following discussion and analysis and subject to the qualifications, limitations and assumptions set forth herein, we are of the opinion that under current U.S. federal income tax law it is more likely than not that: A. JJTLLC, as a single member limited liability company, should be disregarded for Federal income tax purposes. B. C. D. The short sale of Treasury Notes should not be a taxable transaction. The Partnership should be classified as a partnership for federal income tax purposes. Your contributions of cash and the short Treasury Notes position to the Partnership should not be taxable transactions. E. The short Treasury Notes position should not be a liability within the meaning of Code section 752. F. Your basis in your interest in the Partnership after the contribution of cash and the short securities position should be increased by the cash contributed, without adjustment for the Short sale obligation. G. The closing of the short sale position by the Partnership should not result in a deemed distribution to "you for federal income tax purposes and the provisions of Code section 705(a)(2)(B) should not apply; consequently, no adjustment to your adjusted basis in yourPartnership interest should be required as a result of the Partnership closing the short Treasury Notes position.
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Case 1:05-cv-00296-FMA

Document 38-11

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Jenkens & Gilchrist
A PROFE8810NAL CORPORATION

Mr. Joseph J. Tigue January 31, 2000 Page 4

H. I.

The step transaction and sham transaction doctrines should not apply. Treasury Regulation section ("Treas. Reg. see.") 1.701-2 should not apply to the transactions described herein.
' t " "

Each of the conclusions set forth above is supported by"substantial

authority," and relevant

tax positions reported by you and the Partnership in accordance therewith are, as described, "more likely than not proper," as those terms are used in Code section 6662. The opinions set forth above are subject to the following qualifications,
· . ...

limitations

and

exceptions: No opinion is expressed about the tax treatment of the described transaction for purposes of any state or local income tax, or any tax other than the United States federal income tax. Any misstatement of a material fact or omission of any fact that may be material or any

change in any of the facts referred to may require a modification of all or a part of our opinions. Our opinions are limited to the matters expressly set forth herein and no opinion may be implied or inferred beyond the matters so stated. The opinions expressed herein are based upon our interpretation of current law. The opinions expressed herein are not binding on the Internal Revenue Service ("IRS"or "Service") or the courts, and there can be no assurance that the IRS and the courts will not take a position contrary to the opinions expressed herein. We do not undertake to advise The Code, the regulations

you of any changes in law which may occur after the date hereof. promulgated thereunder, and the administrative

position of the IRS are subject to change either

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Case 1:05-cv-00296-FMA

Document 38-11

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Jenkens&Gflchrist
A PROFESSIONAL CORPORATION

Mr. Joseph J. Tigue January 31, 2000 Page 5
t

prospectively

or retroactively.

Such changes could render certain or all of the opinions expressed

herein inapplicable. For purposes of all of the above opinions, we are relying on the truth of the representations of you and/or partners of the Partnership. The opinions expressed herein are furnished by us solely for your benefit and for the benefit of the Partnership and they may not be relied upon or delivered to any person other than you and the Partnership approval. REPRESENTATIONS You and/or partners of the Partnership have represented the following: a. You entered into the sale of the Treasury Notes for substantial nontax business reasons, including (i) to produce overall economic profits because of your belief that the short end oftheU.S. Treasury interest yield curve would change; and (ii) your and the successors or assigns of those persons without our express, prior written

belief that the most direct way, with the most leverage, to realize gain from expected change in interest rates was the short sale of the Treasury Notes. b. You contributed the short Treasury Notes position to the Partnership for substantial nontax business reasons. c. The decision to close the short position in the Treasury Notes was based upon the belief that substantial interest rate changes in the near term were unlikely and that the market had already adjusted for the interest rate changes expected.
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Case 1:05-cv-00296-FMA

Document 38-11

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Jenkens & Gilchrist
A PROFESSIONAL CORPORATION

Mr. Joseph J, Tigue January 31, 2000

Page 6
d. Neither you, JJTLLC, nor the Partnership were obligated to engage in any transaction to which our opinions herein, relate upon the completion transactions. e. To the best of your knowledge, circumstances APPLICABLE LAW
f

of any other of such

you have provided to us all the facts and

necessary for us to form o_ opinion. "

Our analysis of the applicable United State s federal income tax law with respect to the abovestated facts and in support Of each Of the lettered opinions as set forth on pages 3 and 4 hereof is attached, with eacla attachment levered to correspond to each such opinion. Based on the foregoing and subject to the qualifications, limitations and assumptions set forth

herein, we are of the opinion that the described tax consequences have substantial authority and that it is more likely than not that you will prevail if chall.enged by the IRS.
s

Very truly yours,

JENKENS & GILCHRIST

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Case 1:05-cv-00296-FMA

Document 38-11

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Jenkens&Gflchrist
A PROFESSIONAL WEST CORPORATION 225 CHICAGO, WASHINGTON STREET SUITE 2600 ILLINOIS 60606-3418 (312) 425-3900 FACSIMILE (312) 425-3909 www.jenkens.com

AUSTIN. TEXAS (512) 499-3800 DALLAS. TEXAS (214) 855-4500 HOUSTON, TEXAS (713) 951-3300 LOS ANGELES, CALIFORNIA (310) 820-8800 SAN ANTONIO, TEXAS (210) 246-5000 WASHINGTON_ D.C. (202) 326-1500

January31, 2000 CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED

/,

----- ---------- -- ------- ---- -------------- ---- Colleyville, Texas 76054 Dear Mrs. Tigue: You have requested us to review the United States federal income tax consequences of a number oftransactions in which you have been involved and to provide our opinion regarding certain material United States federal income tax issues. Such transactions are described below under the heading "Facts." In connection with this opinion, we have examined such matters of law, and such corporate and partnership records and such other agreements, certificates, instruments and documents, and we have made such other inquiries of officers, owners and representatives of the entities involved, as we have deemed necessary to render the opinions set forth herein. We have without any

investigation Orindependent confirmation relied upon and assumed the accuracy of the responses

CHICAGO

28848

v I, 45885.00001

O000001i

Case 1:05-cv-00296-FMA

Document 38-11

Filed 11/28/2005

Page 8 of 12

Jenkens&Gflchrist
A PROFESSIONAL CORPORATION

Mrs. Virginia B. Tigue January 31, 2000 Page 2
, I

to such inquiries and such certificates, corporate and partnership records and other documents with respect to factual matters. FACTS In particular, our opinion is based upon the following facts: 1. On December 9, 1999, you, through a Delaware limited liability company wholly

owned by you, VBT Meandering Investments LLC (hereinafter referred to as "VBTLLC"), engaged in a transaction commonly referred to as a "short sale," in which you sold $5.0 million face value Treasury Notes maturing November 30, 2001, for $4,989,059.50 plus interest of $8,025:96, for total proceeds equal to $4,997,085.46. 2. On December 10, 1999, you transferred the proceeds from the sale of the securities, margin cash as a contribution to You continued

together with the short Treasury Note position and $25,000.00

capital of Grapevine Imports, Ltd., a Texas limited partnership (the "Partnership").

to maintain additional margin in your account to support any losses in the event the short securities position went down in value. 3. On December 10, 1999, the Partnership closed its short securities position by buying

Treasury Notes in the market and "covering" its short position.

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Case 1:05-cv-00296-FMA

Document 38-11

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Jenkens&Gilchrist
A PROFESSIONAL CORPORATION

Mrs. Virginia B. Tigue January 31, 2000 Page 3

OPINION Based on the following discussion and analysis and subject to the qualifications, limitations and assumptions set forth herein, we are of the o finion that under current U.S. federal income law it is more likely than not that: A. VBTLLC, asa single member limitediiability ) Federal income tax purposes. B. C. D. The short sale of Treasury Notes should not be a taxable transaction. The Partnership should be classified as a partnership for federal income tax purposes. Your contributions of cash and the short Treasury Notes position to the Partnership company, should be disregarded for

tax

should not be taxable transactions. E. The short Treasury Notes position should not be a liability within the meaning of Code section 752. F. Your basis in your interest in the Partnership after the contribution short securities adjustment G. position should be increased of cash and the without

by the cash contributed,

for the short sale obligation.

The closing of the short sale distribution

positionby the Partnership should not result in a deemed
of Code

to you for federal income tax purposes and the provisions

section 705(a)(2)(B) should not apply; consequently, no adjustment to your adjusted basis in your Partnership interest should be required as a result of the Partnership

closing the short Treasury Notes position.
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Case 1:05-cv-00296-FMA

Document 38-11

/

Filed 11/28/2005

Page 10 of 12

Jenkens & Gflchrist
A PROFESSIONAL CORPORATION

Mrs. Virginia B. Tigue January 31, 2000 Page 4

H. I.

The step transaction and sham transaction doctrines should not apply. Treasury Regulation section ("Treas. Reg. sec.") 1.701-2 should not apply to the transactions described herein.

Each of the conclusions set forth above is supported by"substantial authority," and relevant tax positions reported by you and the Partnership in accordance therewith are, as described, "more likely than not proper," as those terms are used in Code section 66621 The opinions set forth above are subject to the following qualifications, limitations and exceptions: No opinion is expressed about the tax treatment of the described transaction for purposes oi" any state or local income tax, or any tax other than the United States federal income tax. Any misstatement of a material fact or omission of any fact that may be material or any change in any of the facts referred to may require a modification of all or a part of our opinions. Our opinions are limited to the matters expressly set forth herein and no opinion may be implied or inferred beyond the matters so stated. The opinions expressed herein are based upon our interpretation of current law. The opinions expressed herein are not binding on the Internal Revenue Service ("IRS"or "Service") or the Courts,and there can beno assurance that the IRS and the courts will not take a position contrary tothe opinions expressed herein. We do not undertake to advise you of any Changes in law which may occur after the date hereof. The Code, the regulations promulgated thereunder, and the administrative position of the IRS are subject to change either

CHICAGO

28848

v I, 45885.00001

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Case 1:05-cv-00296-FMA

Document 38-11

Filed 11/28/2005

Page 11 of 12

Jenkens&Gilchrist
A PROFESSIONAL CORPORATION

Mrs. Virginia B_ Tigue January 31, 2000 Page 5

prospectively or retroactively. herein inapplicable.

Such changes could render certain or all of the opinions expressed

For purposes of all of the above opinions, we are relying on the truth of the representations of you and/or partners of the Partnership. .

The opinions expressed herein are furnished by us solely for your benefit and for the benefit of the Partnership and they may not be relied upon or delivered to any person other than you and the Partnership and the successors approval. REPRESENTATIONS You and/or partners of the Partnership have represented the following: a. You entered into the sale of the Treasury Notes for substantial nontax business or assigns of those persons without our express, prior written

reasons, including (i) to produce overall economic profits because of your belief that the short end of the U.S. Treasury interest yield curve would change; and (ii) your belief that the most direct way, with the most leverage, to realize gain from expected change in interest rates was the short sale of the Treasury Notes. b. You contributed the short Treasury Notes position to the Partnership for substantial nontax business reasons. c. The decision to close the short position in the Treasury Notes was based upon the belief that substantial interest rate changes in the near term were unlikely and that the market had already adjusted for the interest rate changes expected.
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Case 1:05-cv-00296-FMA
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Document 38-11

Filed 11/28/2005

Page 12 of 12

Jenkens&Gilchrist
A PROFESSIONAL CORPORATION

Mrs. Virginia B. Tigue January 31, 2000 Page 6

.

.,

d.

Neither

you, VBTLLC, nor the Partnership

were obligated to engage in any

transaction to which our opinions herein relate upon the completion of any other of such transactions. e. To the best of your knowledge, you have provided to us all the facts and

circumstances necessary for us to form our opinion. APPLICABLE LAW

Our analysis of the applicable United States federal income tax law with respect to the abovestated facts and in support of each of the lettered opinions as set forth on pages 3 and 4 hereof is attached, with each attachment lettered to correspond to each such opinion. Based on the foregoing and subject to the qualifications, limitations and assumptions set forth herein, we are of the opinion that the described tax consequences have substantial authority and that it is more likely than not that you will prevail if challenged by the IRS.

Very truly yours,
f " ·

JENKENS & GILCHRIST

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