Free Cross Motion - District Court of Federal Claims - federal

Case 1:05-cv-00231-EJD
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Facsimile No. (202) 514-5238 Trial Attorney: David M Steiner Attorney's Direct Line: (202) 307-5892

U.S. ~parúent of Justice
Tax Divion
Please reply to: Civl Trial Section, Northern Region
P. O. Box 55

Ben Frank/in Station Washington. D.C. 10044

EJO'C:DMD:DMSteiner 154-2270 CMN 2005103170
October 24. 2006

VI FACSIMLE AND REGULAR MAI
Joel N. Crouch, Esqui Meadows, Owens, Coller, Reed, Cousin & Blau, L.L.P 901 Main Street, Suite 3700

Dallas, Texa 75202
Re: J2 Buckingham Investments LLC as Tax Mattrs Parner

of JBJZ Parers, a South Carolina genera parership v. United States Fed. Cl. No. 05-23 i T
Dear Mr. Crouch:

Enclosed please find the United States' Anwers to Plaintiffs Thd Set of
Interrogatories.

Sincerely your,

DAVID M. STEINR Trial Attorny

~~,ll
~. GOVERNM r
l.: EX~BIT

Civil Trial Section, Nortern Region

Ene.
cc: F. Anthony Paganell, Esq.

Sommer Barard, P.C. One Indian Square, Suite 3500 Indianpolis, IN 46204

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Joseph A. Pitzinger, Esq. Unites States Dept. of Justice

717 Nort Harood, Suite 400
Dallas, TX 75201

Jonath Blacker, Esq. Unites States Dept. of Justice

717 Nort Harood, Suite 400
Dalas. IX 75201

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IN THE UNTED STATES COURT OF FEDERA CLAIMS
No. 05-23 i T (Chief Judge Damich)

JZ Buckingham Investments LLC as Tax Matters Parer
of JBJZ Parers, a South Carolina general parership,

Plaintiff,
v.

United States of America,
Defendant.

UNTED STATES' ANSWERS TO PLAIIFF'S THIRD SET OF INTERROGATORIES
Respondent. the United States of Amenca, hereby responds to Plaitiffs Thid Set of

Interrogatories as follows:

GENERA OBJECTIONS
The United States objects to each of

these interrogatories on thè ground that they, and the

instrctions thereto, fail to recognize that ths proceeding requires a tral de novo

and not a

review of an administative record. The United States is not bound by or limited to any position
taen by the Internal Revenue Service.at the administative stage of this case, including any
position taen by the Internal Revenue Service in the FP AA.

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The United States also objects to many of these Ihterrgatories because they are, in
substace, contention interrogatories and thus prematu. Contention interrogatories are not

appropriate at the initial stages of discovery. Northland Ins. Co. v. Shell Oil Co.. 930 F .Supp.

1069 (D.N.J.,1996.); In Re Domestic Air Transport Antitrst Litigation. 1992 WL 120351 (N. D.
GA. 1992); Leksi Inc. v. Federal Insrance Co., 129F.R.D. 99, 107(D.NJ. 1989). In addition,

the Manual of Complex Litigation Second also discoures the use of contention interrogatories

at the beginnng of discovery, stating "other productive means for clarfyng and narowing the
issues and the contentions of

the paries" are available, parcularly when served before

substantial completion of discovery. Manual at § 21.463. "Without such controls. substial

time. money, and energy may be wasted on contention interrogatories that are either premature or
overinc1usive." Id
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The United States fuer objects to these interrogatories to the extent they request all (or
each and every) fact and all (or each and every) document supportng our legal contentions.
Contention interrogatories should ask only for the principal facts and principal materials
supporting a part's contentions. See e.g., IBP, Inc., v. Mercantile Bank o/Topeka. 179 F.R.D.
316.321 (D.Kan.l998); Bradley v. Val-Mejias,

2001 WL 1249339 (D.Kan. 2001). See also,.

SJ Berwin & Co. v. Evergreen Entertainment Group, Inc., 1994 WL 185687, at *2 (S.D.N.Y. ,
1994) (contention interrogatories should not be a vehicle for requiring a par to regugitate all

factual information leared in discovery).
Without waving these objections or requesting the Cour puruat to Ct of

Fed. Cl. R.

33(b) to defer our response to these contention interrogatories until the completion of discovery,
the United States is providing a preliminary response to each of

these interrogatories. Where

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necessar, however, we will supplement or revise our responses as to our legal contentions as

well as to the principal facts and pricipal materi~s supportng our legal positions once we have
had the opportity to review the documents produced to us and depose the necessa pares and
thrd-pares having information relevant to our legal positions. We also anticipate that the
report and testimony of expert witnesses will support some of

the fàctual positions set fort

below.

INTERROGATORIES

INTERROGATORY NO. 14: Identity and list the nae, address and telephone number for
each and any law firm. financial institution. accounting fi, ta servces or investment advisory
firm that provided any written advice (whether or not constituting a forial wrtten opinion, and

whether or not the advice indicated that the tapayer could rely upon it) to any taxpayer relating
to any tranaction described in Notice 2000-4.

ANSWER: Defendant objects to the Interrogatory on the grounds that it seeks information
that is, in par irrelevant, overbroad, and also places a buren or expense on Defendant that
outweigh its likely benefit.

To the extent the information requested may be relevant to issues in ths case, the United
States fuer objects to the Interrogatory on the ground that Plaintiff has equal access to all the

third part materials from which such information ca be obtained. The United States is not
required to search voluminous materials to provide it with the requested information.

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In fact, even if

the United States has - or were to'- perform a search of

these thd-par

materials, any information obtaned frm such a review would be protected by the Attorney

Work-Prduct Doctne. Fed.R.Civ.Pro. 26(b)(3) parally codifies ths doctre. which gives a
virtally absolute protection to work product which would disclose an attorney's menta
impressions, conclusions, opinions, or legal theones. See, e.g. Sporckv. Peil, 759 F.2d 312, 316

(3d Cir.), cert. denied, 474 U.S. 903 (1985), in ("the selection and compilation of documents by

counsel. . . in preparation for pre-tral discovery falls withn the highly-protected category of

opinion work product.") Id. At 316. As the Cours have noted, "(i)n cases that involve reams of
documents and extnsive document discovery, the selection and compilation of documents is

often more crucial than legal research." Shelton v. American Motors Corp., et al., 805 F.2d
1323, 1329 (8th Cir. 1986).

Moreover, even if any information obtained from our review of these materials could be

viewed as fact - and not opinion - work product, such information would still be protected by the
work product doctrine. A requesting par is not entitled to the frits of

Fact Work Product

unless "the par seeking discovery demonstrates a 'substantial need for the material and an
inabilty to obtain the substantial equivalent of

the inormation without undue hadship... Portis,

et al. v. City a/Chicago, 2004 U.S. ~ist. LEXIS 12640 (N.D.Ill. July 7. 2004)(quoting Eagle
Compressors, Inc. v. HEC Liquidating Corp., 206 F.R.D. 474, 478 (N.D.Il. 2002)). Defendat

has tued over al ta shelter materials obtained in this case-whether obtaned from third paries

or the Intern Revenue Service-- to Plaintiff. which has the same abilty to search it as does
Defendant. Therefore, Plaintiff can make no such showing that it is unable to obtain the
substantial equivalent of

the information requested without undue hardship.

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INTERROGATORY NO. 15: List all pendig or completed litigation in which Defendat is a
par and in which the issues diectly or indiectly involve, or in any way pert to, a Notice
2000-44 Transaction or other disputes which concern substantially the same issues as ar

involved in this cae. Include in your answer the complete poste of such cas(s), the names of

the taxpayer(s), the cour, the docket number. and the name, address, and telephone number of
each attrney reresenting the tapayer(s) in each of such cases.

ANSWER: Defendat objects to the Interrogatory on the grounds tlt it seeks inormation
that is, in part, irrelevant, overbroad, and also places a burden or expense on Defendant that
outweighs its likely benefit. Specifically. Notice 2000-44 covers trsactions other than the
COBRA product here at issue or similar European-style offsetting digital option trsactions.

Notice 2000-44 covers trsactions used to produce noneconomic ta losses on the disposition of
parership interests. Therefore, Notice 2000-44 covers more than just tranactions involving
offetting options. For example. Notice 2000-44 covers trsactions involving a parerships'

assumption of purorted loans with a purortd loan premium. Such transactions have nothg
to do with the case at bar. Therefore, Defendant objects to the Interrogatory to the extent that it

requestS information regarding trsactions other than those involving offsetting European-style

digital options.

Defendant also objects to the Interrogatory to the extent that it requests information that
the Governent may not disclose according to 26 U.S.C. § 6103. Subject to and without

waiving said objections, the following is a partal list of offsetting option cases. which includes
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all COBRA cases and two cases pending in the Cour oîFederal Claims involving offsettng-but

not digita-options:
Case
MURFAM Farms, LLC, et al. v. United States, Fed. CI. No. 06-245T
TIP Attorney

Postue
Discovery

Meadows. Owens.

Coller, Reed,
Cousins & Blau, L.L.P.

90 i Mai Stret,
Suite 3700 Dallas, TX 75202 (214)744-3700

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PSM Farms, LLC, et al. v. United States, Fed. Ci. No. 06-246 T

Meadows, Owens,
Coller, Reed,

Discovery

Cousins & Blau. L.L.P. 901 Main Street, Suite 3700 Dallas, TX 75202 (214)744-3700
Meadows. Owens,

Murphy Pork

Discovery

Partners,LLC, et al.
v. United States, Fed. Cl. No. 06-247T

Coller. Reed,
Cousins & Blau, L.L.P. 901 Main Street, Suite 3700 Dallas. TX 75202 (214)744-3700
Anthony Paganll Sommer Barard,
Discovery as par of

Carmel Parters, et

al. v. United States. 06-8002 (S.D.Ind.)

In re COBRA Tax

P.C. One Indiana Square, Suite 3500 Indianapolis. IN 46204
Anthony Paganell

Shelters Litigation, 05-9727(S.D.Ind.)

(317)713-3444

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Gary Woods v.
United States, 06-

Meadows, Owens,

Discovery as par of

Coller, Reed,
Cousins & Blau. L.L.P. 901 Main Street, Suite 3700 Dallas. TX 75202 (214)744-3700

In re COBRA Tax

800 (S.D.Ind.)

Shelters Litigation, 05-9727(S.D.Ind.)

K2 Trading Ventures, LLC, New Vista, LLC, TMP v. United
States, Fed.CL. 04-

Felix Benjamin Laughlin
Dewey Ballantine

Discovery

Suite 500
Washington, DC

1419T-MCW
.

20006-605
(202)862-1000
Jade Trading, LLC et a1. v. United States,
Fed.CL. 03-2164-

MCW

David DeCoursey Aughtrey Chamberlain, Hrdlicka, et al.
191 Peachtree St..

A waiting decision

NE Ninth Floor Atlanta, GA 30303 (404)659-1852

Mellow Partners,
Myer Berlow, A Partner other than

TMPv. Commissioner, Tax
Cour Docket No.

11453-05
Fairfeld Investment

N. Jerold Cohen Sutherland Asbil & Brennan LLP 999 Peach Tree St., N.E. Atlanta, GA 30309 (404) 853-8000
David DeCoursey

Discovery

Discovery

Partners, DHP
Fiesta Investments

Aughtry
Chamberlain, Hrdlicka, et aL.
191 Peachtree St.,

LLC, TMP v. Commissioner. Tax
Cour Docket No.

5484-06.

NE Ninth Floor Atlanta, GA 30303 (404)659-1852

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INTERROGATORY NO. 16: For all cases listed in futerrogatory 15, list the names, contact
information, and employment information for all expert witnesses used. hired and retaned by all

pares.
ANSWER: The United States objects to the Interrogatory becaus the information request is

irrlevant, overbroad, places a burden on Defendat that outeigh its likely benefit, and may be
protected from disclosure by the work product doctrne. The United States fuer objects to the

Interrogatory on the ground tht it is not required to conduct research of cour dockets or tral

records on behalf of the Plaintiff that it is equally capable of conducting on its own behalf.
Without waiving such objections, and to the extent not privileged, the Governent provides the
followig information:

Case
K2

Governent Expert
David DeRosa, Ph.D.

Taxpayer Experts

Nassim Taleb, Ph.D.

DeRosa Research and
Trading, Inc.
495 Whte Oak Shade Road

gamm~fooledbyrandomns
s.com

New Canaa, CT 06840

(203)801-4340
A. Lawrence Kolbe, Ph.D. The Brattle Group 44 Brattle Street Cambridge. MA 02138 (617)864-7900

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Jade Trading

David DeRosa,

Ph.D.

Jeffy Franel,

Ph.D.

DeRosa Research and
Trading. Inc.

10 Humboldt Street Cambridge, MA 02140

495 Whte Oak Shae Road
New Canaa CT 06840 (203)801-4340
A. Lawrnce Kolbe~ Ph.D.

Robe Kolb, Ph.D. 9638 Mountain Ridge Place Boulder, CO 80302 (303)786-9501

The Bratte Group
44 Bratte Stret

Kenchi Shoji, Ph.D. .
29 Eat 22nd Stret

Cambridge, MA 02138 (617)864-7900

New York, NY 10010

Merle Erickson, Ph.D.
Grduate School of Business

University of Chicago Chicago, IL 60637 (773)834-0716

r The United States is not required to fush such expert witness information regarding COBRA
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litigation except pursuat to the scheduling orders of

the cours in this litigation. Accordingly, at

this time such information in protected by the work product doctrne.

INERROGATORY NO.

17:

For all cases listed in Interrogatory 15, list all theories and

support set fort by the Governent expert witnesses listed in Interrgatory 16.

ANSWER: Defendant objects to the Interrogatory on the grunds tht it seeks inonDation
that is irrelevant, overbroad, and also places a burden or expense on Defendant that outweighs its

likely benefit. Defendant also objects to the Interrogatory to the extent that it requests information
that the Governent may not disclose according to 26 U.S.C. § 6103 . Defendant fuer objects

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to the extent the requested inrmation relates to the COBRA litigation because such information
is at ths time protected by the work product doctrne.
Finly. to th extent the anysis of expert witnesses in the non-COBRA litigation may

ultimately beome relevant to the COBRA litigation because the sae expert witnesses in that

litigation are identified by the United States to be expert witnesses in the COBRA litigation, the
proper way to obtain the analysis of such expert witnesses in that prior Ìitigation - as th pares
discussed in their teleconference on October 13,2006 - is to request the reports prepaed by the

experts in these other cases. Interrogatories ar too clumsy a way to seek information regarding
the substace of expert testimony which is why

"(i)n 1993, (Fed.R.Civ.Pro.) 26(b) wa amended

to eliminate the need for interrogatories to determine the substace of an expert's testiony.."

Krisa v. The Equitable Life Assurance Society, 196 F.R.D. 254, 258 (M.D.Pa. 2000)(intemal
quotation marks omitt~.

INTERROGATORY NO. 18: Identify all wrtten and oral communcations made by Plaitiff
or any of

Plaintiffs representatives to you that you contend are admissions within the meaning of
(d)(2) of the Federal Rules of

Rule 801

Evidence.

ANSWER: The United States is still in the process of reviewing the materials that may contan
possible admissions by the Plaintiffs or their representatives. At ths stage of discovery, the
United States had indemnified the following such communcations. The United States reserves the

right to supplement ths list.
1. Letter dated November 18, 2002, to IRS Revenue Agent Alan E. Moss from

Nelson A. Brooke.

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2. Lettr dated April 23, 2003, to IRS Reventi Agent Alan E. Moss from Nelson A.

Brooke.
3. Form 13586 signed by J~ and Anta Zucker on September 4, 200.
4. Form 13586 signed by James and Hael Boyd on September 16,2004.
5. Facsimile dated April 12. 2002. to IRS Revenue Agent Debra Simons frm

Nelson A. Brooke.
6. Letter dated April

17 . 2002. from James and Hazel Boyd to IRS Revenue Agent

Neva A. Gadsden.
7.. Letter dated April 20, 2002, from Jerr and Anita Zucker to IR Revenue Agent

Debra Simmons.
8. All factu allegations in Plaintifts Second Amended Complaint and Original

Class Action Complaint in Camjerdam, et al. v. Ernst & Young International, Inc.,

et al.. No. 02 Civ. 10100 (S.D.N.Y.)(SJ).

INTERROGATORY NO. 19: Identify the name(s), operator identification number(s) and
contact information of the employee (s), agent(s), or other representative(s) of

the IRS, who made

(or will make) the determnation to apply to ths case the anti~abuse regulations as promulgated by
the Secretar of

the Treas in Treas. Reg. §1.701-2.

ANSWER: The United States objects to this interrgatory on the ground that the information
requested is not relevant to this action and is also not reasonably calculated to lead to the

discovery of admissible evidence in this suit for adjustment of a final parership administrative
adjustment (FP AA). In a federal tax case, any challenge by a taxpayer to the Commissioner's
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determination tht

taes are owig must be resolved in a tral de novo, rather than by review of an

existing administrtive record. See e.g., Revell, Inc. v. Riddell, 273 F.2d 649,658-59 (9t Cir.
1?59); Greenberg's Express, Inc. v. Commissioner, 62 T.e. 324.327-28 (1974). An FPAA is the

equivalent of a notice of deficiency in a refud action. In re G-l Holdings, Inc., Civ. No. 02-

03082 (WGB) (D.N.J. July 16, 200). In an FP AA action. the parer must establish that the
FP AA is incorrect, which, in tu, requis the cour to apply the law to the facts of the case. The

reasons for the Commissioner's determination ar not relevant because the cour does not review
the administrtive reasons, policy or procedur of

tht determination. Greenberg's Express, Inc.

v. Commissioner, 62 T.C. 324, 327-28. Notwthtading and without waiving ths objection, the

United States notes ~t the Revenue Agent who was assigned ths case at the administtive level
was Alan E. Moss, who is now retied. The FP AA was signed by Techncal Services Territory
Manager Sheilà Savino, who is now decese.

INTERROGATORY NO. 20: Please identify each document and each fact you relied or reply
upon in denying any of Plaintiffs First Set of

Requests for Admissions

ANSWER: Defendant objects to the Interrgatory on the grouns that, to the extent tht it is .
proper. it is an attempt to circumvent the limitation on interrogatories ordered by the Cour.
Defendant denied over 60 of

Plaintiffs Request for Admissions. This is an attempt to compress

60-odd interrogatories into a single interrogatory.

Defendant fuer objects to the Interrgatory on the grouns that it seeks information
that is, in par irrelevant, overbroad, and places a burden or expense on Defendat that outweighs
its likely benefit.

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INRROGATORY NO. 21: Do you contest tht pridr to promulgation ofTreas. Reg. §1.7526 and Treas. Reg. §1.752-7 and the changes to Trea. Reg. §1.752-1 in June 2003. it was well-

setted law tht "contigent obligations" were not trted as liabilties for purses of Section 752
of

the Code? If so, i~ntify each document and state eah fact you rely upon for ths position. If

not, identify each document and stte each fact you rely upon for ths position.

ANSWER:. Defendant objects to the Interrogatory on the ground that it involves "inquiries
into 'issues of

pure law." Kendrick v. Sullvan. 125 F.R.D. 1,2 (D.C. 1989) citing Note of

Advisory Comm. On Rules, 1970 Amend. to Rule 33; Steil v. Hunana Kansas City, Inc., 197
F.R.D. 445, 447 (D. Kan. 2000); Langer v. Presbyterian-University o/Pennsylvania Medical
Center, 1988 W.L. 56972 (E.D. Penn. 1988). Cour of

Fed. Cl. Rule 33(c) requires tht

contention interrogatories be posed in a maner that inquire into the application of law to the facts
at issue. See e.g., Kendrick v. Sullivan. 125 F.R.D. at 3. Interrgatories that seek abstract
t
\
opinons of the law or pure legal contentions fall outide the bounds of

Rule 33(b) and are

therefore impermssible. See, e.g., Abbott v. United States, 177 F .R.D. 93-94. This interrogatory
seeks "pure legal conclusions which ar related not to th facts. but to the law of

the case."

Ransom v. United States, 8 Ci.Ct. 646, 647-48 (1985); Notes of Advisory Comm. on

Rules, 1970

Amend. to Rule 33. The United States fuer objects to the Interrogatory upon the grund of the

governental deliberative process privilege and upon the ground of relevancy. Notwthtading
and without waiving these objections, Defendant refers Plaintiff

to its response to Interrogatory 7

of

Plaintiffs Second Set of

Interrogatories.

INTERROGATORY NO. 22: Furer, do you contest that the definition of

the term "liability"

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in Treas. Reg. § 1.752-6 includes "contingent obligations?" If so, identifY each document and
state each fact you rely upon

for ths position. Ifnot, identifY each document and state each fact

you rely upon for th position.

ANSWER: Defendant objects to the Interrgatory on the grund that it involves "inquiries
into 'issues of

pure law." Kendrick v. Sullvan, 125 F.R.D. 1,2 (D.C. 1989) citing Notes of

Advisory Comm. On,Rules. 1970 Amend. to Rule 33; Steil v. Hunana Kansas City, Inc., 197
F.R.D. 445, 447 (D. Kan. 2000); Langer v. Presbyterian-University a/Pennslvania Medical
Center, 1988 W.L. 56972 (B.D. Penn. 1988). Cour of

Fed Cl. Rule 33(c) requires that

contention interrogatories be posed in a maner that inqui into the application of law to the facts .
at issue. See e.g.. Kendrick v. Sullvan, 125 F.R.D. at 3. Interrgatories that seek.abstract
opinions of the law or pure legal contentions fall outside the bounds of

Rule 33(b) and ar

therefore impermissible. See, e.g., Abbott v. United States, 177 F .R.D. 93-94. Ths integatory
seeks "pure legal conclusions which are related not to the facts, but to the law of

the case."

Ransom v. United States, 8 Ci.Ct 646, 647-48 (i 985); Notes of Advisory Comm. on Rules, 1970
Amend. to Rule 33. The United States fuer objects to the Interrogatory upon the ground of

the

governental deliberative process privilege and upon the ground of relevancy. Notwthstading
and without waiving these objections, Defendat refers Plaintiff

to its respnse to Interrogatory 7

of

Plaintiffs Second Set of

Interrogatories.

INTERROGATORY NO. 23: Do you contest that Treas. Reg. §1.752-6 purort to overrle
the 1975 case of Helmer v. Comm'r, T.C. Memo 1975-160, which held that an option to purchase
certin real propert did not constitute a liabilty for purses of

Section 752? Ifso, identify each

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document and state each fact you rely upon for ths positibn. If not, identify each document an
state each fact you rely upon for ths position.

ANSWER: Defendant objects to the Interrogatory on the ground that it involves "inquies
into 'issues of pure law." Kendrickv. Sullvan. 125 F.RD. 1,2 (D.C. 1989) citing

Notes of

Advisory Comm. On Rules, 1970 Amend. to Rule 33; Steil v. Hunana Kansas City, Inc., 197
F .R.D. 445, 447 (D. Kan. 2000); Langer v. Presbyterian-University of Pennslvania Medical
Center, 1988 W.L. 56972 (B.D. Penn. 1988). Cour of

Fed. Cl. Ru1e 33(c) requires that

contention interrogatories be posed in a maner tht inquire into the application of law to the facts

at issue. See e.g., Kendrick v. Sullvan. 125 F.R.D. at 3. Interrogatones that seek abstrct
opinions of the law or pure legal contentions fall outside the bounds of Rule 33(b) and ar
therefore impenissible. See, e.g., Abbott v. Un.ited States, 177 F .R.D. 93-94. This interrogatory

seeks "pure legal conclusions which are related not to the facts. but to the law of

the case."

(

Ransom v. United States. 8 Cl.Ct. 646. 647-48 (1985); Notes of Advisory Comm. on Rules. 1970
Amend. to Rule 33. The United States fuer objects to the Interrgatory upon the groun of

the

governenta deliberative process privilege and upon the grund of relevancy. Notwthtang
and without waiving these objections, Defendant refers Plaitiff to its respnse to Interrogatory 1
ofPlaintiff~ Fir Set of Interrogatories and Interrogatory 7 of

Plaitiffs Second Set of

Interrogatories.

INERROGATORY NO. 24: DO you contest

that

Section 309(c) of

the Community

Renewal

Tax Relief Act of

2000, Pub. L. No. 106-554. 114 Stat. 2763 (2000) only authorized the Secreta

of the Deparment of the Treasur to prescribe rules to provide "appropriate adjustments. . . to

c.

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prevent the acceleration or duplication oflosses though the

assumption of (or trsfer of assets

subject to) liabilties described in section 358(h)(3) . . . in trsactions involvig parersp"? If
so, identify each documents and state each fact you rely upn for this poition. If not, identi

each docwnent and stte each fact you rely upon for ths position.

l.NSWER: Defendat objects to the Interrogatry on the ground that it involves "inquies
into 'issues of

pur law.'~ Kendrickv. Sullvan, 125 F.R.D. 1,2 (D.C. 1989) citing Notes of

Advisory Comm. On Rules, 1970 Amend. to Rule 33; Steil v. Hunana Kansas City, Inc.,

197

F.R.D. 445,447 (D.Kan. 2000); Langer v. Presbyterian-University of Pennslvania Medical
Center, 1988 W.L. 56972 (E.n. Penn. 1988). Cour of

Fed. Cl. Rule 33(c) requires that

contention interrgatories be posed in a maner tht inquire into the application of law to the facts
at issue. See e.g., Kendrick v. Sullvan. 125 F.R.D. at 3. Intergatories tht seek abstrt

opinions of

the law or pure legal contentions fall ~utside the bounds of

Rule 33(b) and ar

therefore impermissible. &e, e.g., Abbott v. United States. 177 F.R.D. 93-94. This interrgatory
seeks "pure legal conclusions which ar related not to the facts, but to the law of

the case."

Ransom v. United States, 8 Ci.Ct. 646, 647-48 (1985); Notes of Advisory Comm. on

Rules, 1970

Amend. to Rule 33. The United States fuer objects to the Interrogatory upon the ground of

the

governmenta delibertive proess privilege and upon the grund of relevancy.' Notwthstading
and without waiving these objections, Defendat refers Plaintiff to its responses to Interogatories
1 and 2 of Plaintiffs First Set of

Interrogatories.

INTERROGATORY NO. 25: Do you contest that. to be valid. Trea. Reg. § 1.752-6 mus be
limited to preventing the acceleration to duplication of losses? If so. identi each document and
f.
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state each fact you rely upon for ths position. If not, iderttify each document and state each fat
you rely upon- for this position.

ANSWER: Defendant objects to the Interrgatory on the groun tht it involves "inquires
into 'issues of

pur law." Kendrick v. Sullivant 125 F.R.D. 1~ (D.C. 1989) citing Notes of

Advisory Comm. On Rules, 1970 Amend. to Rule 33; Steil v. Hunana Kansas City, Inc., 197
F.R.D. 445, 447 (D. Kan. 200); Langer v. Presbyterian-University of Pennsylvania Medical
Center, 1988 W.L. 56972 (B.D. Penn. 1988). Cour of

Fed. Cl. Rule 33(c) requires tht

contention interrogatories be posed in a maner that inquire into the application of law to the facts
at issue. Se.e e.g.t Kendrick v. Sullvan, 125 F.R.D. at 3. Interrogatories that seek absct

opinions of the law or pure legal contentions fal outside the bounds of Rule 33(b) and are

therefore impermissible. See, e.g., Abbott v. United States, 177 F.R.D. 93-94. Ths interrogatory
seeks "pure legal conclusions which are related not to the facts, but to the law of

the cae."

l'~

Ransom v. United States, 8 ci.Ct. 646.647-48 (1985); Notes of Advisory Comm. on Rules, 1970
Amend, to Rule 33. The United States fuer objects to the Interrogatory upon the ground of

the

governental deliberative process privilege and upon the ground of relevancy. Notwthtanding
and without waiving these objections, Defendat refers Plaitiff

to its responses to Interrogatones

i and 2 of

Plaitiffs First Set ofInterrogatones.

INTERROGATORY NO. 26: Do you contest that, in dring Treas. Reg. § 1.752-6, the
Internal Revenue Service (the "Service") denied the exceptions of Section 358(h) to the
transactions descnbe in Notice 2000-44 in order to provide the Servce with an additiona basis

for challenging the transactions described in Notice 2000-44? It so. identify each document and
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state each fact and lega position th you rely upon for tls position. If not, identify each
document and state each fact and legal position you rely upon for ths position.

ANSWER: Defendat objects to the Interrogatory on the grun tht it involves "inquiries
into 'issues of pur law." Kendrickv. Sullivan, 125 F.R.D. 1,2 (D.C. 1989) citi

Notes of

Advisory Comm. On Rules, 1970 Amend. to Rule 33; Steil v. Hunana Kansas City, Inc., 197
F .R.D. 445,447 (D. Kan. 2000); Langer v. Presbyterian-University of Pennslvania Medical
Center, 1988 W.L. 56972 (B.D. Penn. 1988). Cour of

Fed. Cl. Rule 33(c) reuires that

contention interrogatories be posed in a maner that inquire into the application of law to the facts

at issue. See e.g., Kendrick v. Sullvan, 125 F.R.D. at 3. Interrogatories that seek abstrct
opinions of th law or pure legal contentions fall outside the bounds of Rule 33(b) and ar
therefore impermissible. See, e.g., Abbott v. United States, 177 F.R.D. 93-94. Ths interrogatory
seeks "pur legal conclusions which are related not to the facts, but to the law i, ; of

the case."

Ransom v. United States, 8 CLCt. 646,647-48 (1985); Notes of Advisory Comm. on Rules, 1970
Amend. to Rule 33. The United States fuer objects to the Interrogatory upon the ground of

the

governenta deliberative process privilege and upon the ground of

relevancy. Notwthstading

and without waiving these objections, Defendant refers Plaintiff to its responses to Interrgatories
1 -3 ofPlaintifls First Set oflnterrogatories.

INTERROGATORY NO. 27: The Preamble to Treas. Reg. § 1.752-7 provides: "In the
corporate context, section 358(h) prevents the duplication and aceleration of

loss with respect to

obligations not encompassed by section 358(d) by reducing the trsferor sharholder's basis in

corporate stock received in the exchange. Treasur and the IRS do not believe that this is the best

(

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approach for paership given theirpasstough natu"~ Explain how Tre. Reg. § 1.752-6,

whch applies to parerships a rue like the rue in Section 358(h). provides for the "appropriate
adjustents" contemplated in Section 309(c) of

the Communty Renewa Tax Relief Act of2000.

when Preamble to Treas. Reg. § 1.752-7 indicates that this is not ''te best approach."

ANSWER: Defendant objects to the Interrogatory on the ground that it involves "inquies
into 'issues of

pure law." Kendrick v. Sullivan. 125 F.R.D. 1,2 (D.C. 1989) citing Notes of

Advisory Comm. On Rules. 1970 Amend. to Rule 33; Steil v. Hunana Kansas City, Inc., 197
F.R.D. 445, 447 (D. Ka. 2000); Langer v. Presbyterian-University of

Pennsylvania Medical

Center, 1988 W.L. 56972 (B.D. Penn 1988). Cour of

Fed. Cl. Rule 33(c) requires that

contention interrogatories be posed in a maner tht inquire into the application of law to the facts at issue. See e.g., Kendrick v. Sullvan, 125 F.R.D. at 3. Interrogatories that seek abstact
opinions of the law or pure legal contentions fal outside the bounds of Rule 33(b) and are

therefore impermissible. See, e.g., Abbott v. United States, i 77 F.R.D. 93-94. This interrgatory
seeks ''pur legal conclusions which ar related not to the facts, but to the law of the case."
Ransom v. United States, 8 Cl.Ct. 646, 647-48 (1985); Notes of Advisory Comm. on Rules, 1970
Amend. to Rule 33. The United States fuer objects to the Interrgatory upon the grund of

the

governenta deliberative process privilege and upon the grund of relevancy. Notwthtanding
and without waiving these objections. Defendant.refers Plaintiff

to its responss to Interrogatories

1 -3 of

Plaintiffs First Set of

Interrogatories.

INTERROGATORY NO. 28: Do you contest that Treas. Reg. § 1.752-6 does not apply to
"liabilties described in section 358(h)(3)"? If so, state what your position is on this mattr and
¡.
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provide an explanation of the legal and factual basis for tht position.

ANSWER: Defendat objects to the Interrogatory on the ground that it involves "inuiries
into 'issues of

pure law." Kendrick v. Sullivan. 125 F.R.D. 1,2 (D.C. 1989) citing Notes of

Advisory Comm. On Rules, 1970 Amend. to Rule 33; Steil v. Hunana Kansas City, Inc., 197

F.R.D. 445, 447 (D. Ka. 2000); Langer v. Presbyterian-University of Pennylvania Medical
Center, 1988 W.L. 56972 (B.D. Penn. 1988). Cour of

Fed. Cl. Rule 33(c) requis that

contention interrogatories be posed in a maner that inquie into th application of law to the facts

at issue. See e.g.. Kendrick v. Sullvan, 125 F.R.D. at 3. Interrogatories that seek abstract
opinions of the law or pur legal contentions fall outsde the bounds of

Rule 33(b) and are

therefore impermissible. See, e.g., Abbott v. United States, 177 F.R.D. 93-94. Ths interrogatory
seeks "pure legal conclusions whch are related not to the facts, but to the law of

the case."

Ransom v. United States, 8 Cl.Ct. 64,647-48 (1.985); Notes of Advisory Comm. on Rules, 1970
Amend. to Rule 33. The United States fuer objects to the Interrgatory upon the ground of

the

governental deliberative process privilege and upon the grund of relevancy. Notwthstading
and without waiving these objections, Defendant refers Plaintiff

to its responses to Interrgatories

i -3 of

Plaintiffs First Set of

Interrogatories.

INTERROGATORY NO. 29: Do you contest that Treas. Reg. § 1.752-6 was issued for the
purse of providing the Service with an additional basis for challenging the trsactions

. described in IRS Notice 2000-44? If so, state what your position is on this matter and provide an

explanation of the legal and factual bais for that position.

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ANSWE: Defendant objects to the Interrgatory on the ground that it involves "inquiries
into 'issues of pur law." Kendrickv. Sullvan. 125 F.R.D. 1,2 (D.C. 1989) citing

Notes of

Advisory Comm. On Rules, 1970 Amend. to Rule 33; Steil v. Hunana Kansas City, Inc.. 197
F.R.D. 445, 447 (D. Kan. 2000); Langer v. Presbyterian-University of

Pennsylvania Medical
Fed. Cl. Rule 33(c) reuis that

Center, 1988 W.L. 56972 (B.D. Penn. 1988). Cour of

contention interrgatories be posed in a maner tht inquire into the application of law to the facts

at issue. See e.g., Kendrick v. Sullvan. 125 F.R.D. at 3. Interrogatories tht seek abstract
opinions of the law or pure legal contentions fall outside the bounds of

Rule 33(b) and ar

therefore imperissible. See, e.g., Abbott v. United States, 177 F.R.D. 93-94. Ths interrogatory
seeks "pur legal conclusions which are related not to the. facts, but to the law of the case."

Ransom v. United States, 8 Ci.Ct. 646, 647-48 (1985); Notes of Advisory Comm. on Rules, 1970
Amend. to Rule 33. The United States fuer objects to the Interrogatory upon the ground of

the

(

governenta deliberative process privilege and upon the ground of relevancy. Notwthding .
and without waving these objections, Defendat refer Plaintiff

to its responses to Integatories

1 -3 of

Plaintiffs First Set ofInterrogatories.

INTERROGATORY NO. 30: Explain why the Service issued Treas. Reg. § i .752-6 to apply
retroactively and Teas. Reg. § 1.752-7 to apply prospectively to address the sae issues? Explain
why Treas. Reg. § 1.752-7 was not made effective on a retroactive basis, rather th issuig Treas.

Reg. § 1.752-6.

ANSWER: Defendant objects to the Interrogatory on the grund that it involves "inquiries

(

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into 'issues of

pur law." Kendrick v. Sullvan. 125 F.R.D. 1,2 (D.C. 1989) citig Notes of

Advisory Comm. On Ru1es. 1970 Amend. to Rule 33; Steil v. Hunana Kansas City, Inc., i 97
F.R.D. 445, 447 (D. Kan. 2000); Langer v. Presbyterian-University of

Pennsylvania Medical
Fed. Cl. Rule 33(c) requires tht

Center, 1988 W.L. 56972 (B.D. Penn. 1988). Cour of

contention interrgatories be posed in a maner that inuie into the. application of law to the fact
at issue. See e.g.. Kendrick v. Sullvan, 125 F.R.D. at 3. Interrogatories tht seek abstrct
opinions of the law or pur lega contentions fall outside the bounds of

Rule 33(b) and ar

therefore impermissible. See, e.g., Abbott v. United States, 177 F .R.D. 93-94. Ths interrogatory
seeks "pure legal conclusions which are related not to the facts, but to the law of

the case."

Ransom v. United States, 8 Ci.Ct. 646. 647-48 (1985); Notes of Advisory Comm. on Rules, 1970
Amend. to Rule 33. The United States fuer objects to the Interrogatory upon the ground of

the

governental deliberative process prvilege and upon the ground of

relevancy. Notwthstading
to its responses to Interrogatories

and without waiving these objections, Defendant refers Plaintiff

1 -3 of

Plaintifs First Set of

Interrgatories.

INTERROGATORY NO. 31: Explain why the governent waited approximately two an onehalf years afer the enactment of the Commmity Renewal Tax Relief

Act of2000 to firs issue

what is now Treas. Reg. § 1.752-6 as a tempora regulation.

ANSWER: Defendat objects to the Interrogatory on the grund that it involves "inquiries
into 'issues of

pure law." Kendrick v. Sullvan, 125 F.R.D. 1,2 (D.C. 1989) citing Notes of

Advisory Comm. On Rul.es, 1970 Amend. to Ru1e 33; Steil v. Hunana Kansas City, Inc., 197

(

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F .R.D. 445, 447 (D. Ka. 2000); Langer v. Presbyterian-University of Pennlvania Medical
Center, 1988 W.L. 56972 (E.D. Penn 1988). Cour of

Fed. Cl. Rule 33(c) requires tht

contention interrgatories be posed in a maner tht inquire into th application of law to the facts
at issue. See e.g., Kendrick v. Sullvan, 125 F.R.D. at 3. Interrgatories tht seek abstrct

opinions of

the law or pur legal contentions fall outide the bounds of

Rule 33(b) and are

therefore impermissible. See, e.g., Abbott v. United States, 177 F.R.D. 93-94. Ths interrogatory ,
seeks "pur lega conclusions which are related not to the facts, but to the law of

the case."

Ransom v. United States,S C1.Ct 646,647-48 (1985); Notes of Advisory Comm. on Rules, 1970
Amend. to Rule 33. The United States fuer objects to the Interrgatory upon the ground of

the

governenta deliberative process privilege and upon the ground of relevancy. Notwthtadig
and without waving these objections, Defendat refes Plaitiff to its responses to Interrgatories
i -3 of Plaintiffs First Set of

Interrogatories.

INTERROGATORY NO. 33: State your position as to whether the reliance by the Individual
Paricipants on the legal opinons issued by Jenkens & Gilchrst and Brown & Wood represents

"reasonable cause" for purses of Section 6664 of the Interal Revenue Code. Provide a detailed
explantion of the legal and factu bais for your position.
ANSWER: Defendant objects to the Interrogatory on the grund that it is vag and ambiguous.
The meaning ofthe term "Individual Paricipats" is not clear. If

the reference is to the Individual

Paricipats in the instat litigation ( Zucker and Boyd) , the defendant fuer objects on the

ground of relevancy. As of now. no penalties have been asserted in the FP AA that is the subject
of ths litigation. If

the reference is to the Individual Paricipats in other COBRA litigation in

which penalties were asserted in the FP AAs which ar the subject of that litigation, the defendant

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also objects on the grund of relevancy.

INRROGATORY NO. 34: Do you contest tht Jenkens & Gilchrst and Brown & Wood
were quaifed to issue the opinons to the Individua Parcipants? If so, stte what your position
is on ths mattr and provide and explantion of the legal factual basis for tht position.

ANSWER: Defendat objects to the Intergatory on the ground that it is vage and ambiguous.
The meag of the ter "Individua Parcipants" is not clear. If

the reference is to the Individua

Parcipants in the intat litigation ( Zucker and Boyd) , the defendat fuer objects on the
grund of relevancy. As of

now, no penaties have been asserted in the FPAA that is the subject

of this litigation. If the reference is to the Individua Parcipants in other COBRA litigation in
which penties were asserted in the FP AA which ar the .subject of that litigation. .the defendat
also objects on the ground of

relevancy.

INTERROGATORY NO. 35: Do you contend that Jenens & Gilchrst and Brown & Woo
had conficts of interest in rendering the ta opinons to tle Individual Parcipats? If so, state

what your position is on this matter and provide an explanation of

the legal and factual basis for

that position.

ANSWER: Defendant objects to the Interrogatory on the grund that it is vague and ambiguous.
The meanng of the term "Individual Parcipants" is not clear. If

the reference is to the Individual

Parcipats in the intat litigation ( Zucker and Boyd) , the defendant fuer objects on the

ground of

relevancy. As of

now, no penaties hav.e been asserted in the FPAA tht is the subject

of

this litigation. If

the reference is to the Individua Partcipants in other COBRA litigation in

c,

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,
~

l

which penaties were assertd in the FPAAs which are thè subject of

that litigation, the defendant

also objects on the groun of

relevancy.

I, Dens M. Donohue, puruat to the provisions of28 U.S.C. Section 1746 declar
under penaty of perjur tht the foregoing responses to the plaintiffs interrgatories are tre and
corrct to the best of my knwledge. information, and belief.

Dated ths October 24.2006. in Washigton, D.C.

Respectfly submitted,

.~ lA. ~ bbtJ
DENNSM. DONOHU
SENOR UTIGA nON COUNSEL
OFFICE OF CIVIL LITIGA nON Trial Attorney, Tax Division U.S. Deparent of Justce P.O. Box 403
Ben Franlin StatioÌ1

Washington, D.C. 20044 Telephone: (202) 307-5892
E-mail: denns.donohue(ßusdoj.gov

EILEEN J. O'CONNOR
Assistat Attorney General

DA VI GUSTAFSON

( \.

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CERTICATE OF SERVICE
I hereby cert that on October 24, 2006, a copy of the foregoing UNTED STATES'

ANSWERS TO PLAIN'S TH SET OF INRROGATORIS wa maied by First Class
U.S. mail postge paid. and properly addrsse to the followig:

Joel N. Crouch Texas State Bar No. 05144220 Meadows, Owens, Coller, Reed Cousins & Blau, L.L.P. 901 Main Stret, Suite 3700 Dallas, Texas 75202

~1t. l~,J
D VID M. STEINRTrial Attorney, Tax Division U.S. Deparent of Justice P.O. Box 55

Ben Frain Station .
Washigtn. D.C. 20044

Telephone: (202) 307-5892 Facsimile: (202) 514-5238 E-mail: David.M.steiner2cæsdoi.gov

('.

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