The Bright Coast

Progressive Thoughts from San Diego Alums on Law, Politics, and Culture

Cattle and Sheep can be so much fun!

Posted by reasonablecause on June 4, 2010

You know, come to think of it, our parents were onto something when they repeatedly scolded us for not following directions.  “Don’t eat that.”  “Don’t break that.”   “Be careful.”  “Stop hitting your brother.”  It just makes sense sometimes to listen to others because you never know when they just might be looking out for your best interests.  So, it makes good sense to heed blatant warnings sometimes.  This particularly holds true when the IRS is the one taking the time to provide the warnings.  So, why not take note the next time you’re fortunate enough to get a letter like this in the mail:

You have been identified as a partner in a tax shelter partnership. We believe that tax shelter deductions and/or credits from such tax shelter partnerships will not be allowable and an examination will be conducted when the returns are filed. 

 So what, who cares.  I mean, of all things, why would you worry about the IRS pursuing you when it expressly tells you that it will?  ?…..(seriously, wtf is wrong with you)…????.  Judge Marvel (U.S. Tax Court) justifiably has a good time here: 

Petitioner is a well-educated financial professional. He holds a master’s degree in business, and his study included classes in accounting. Despite his education and experience, petitioner invested in Durham Shorthorn and Shorthorn Genetic solely on the basis of his conversations with promoters and other Hoyt Farms investors. Petitioner did not do any meaningful due diligence with respect to the partnerships, and he did not consult an independent legal or tax professional before he invested in the partnerships . . . .

The record does not disclose any attempt on petitioner’s part to question or investigate whether it was proper for him to drastically reduce his tax liability by deducting as ordinary losses amounts that vastly exceeded his investment in the partnerships, despite the too-good-to-be-true nature of the transactions.  Petitioner did not even make inquiries after he received notice that the Internal Revenue Service had identified the Hoyt partnerships as abusive tax shelters.

Judge Marvel shows us that Cattle, Sheep and Tax Court can be so much fun.

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