BASR P’ship v. United States

In 1999, the Pettinati family was about to realize a large capital gain from the sale of their printing business. Attorney Mayer contacted them and proposed “a tax advantaged investment opportunity.” After the proposed transactions, all stock in the business was owned by a family partnership, BASR. The Pettinatis sold the business by directing BASR to sell its shares. Malone had a long-standing relationship with the Pettinatis, but no prior connection with the attorneys. In preparing the Pettinatis’s taxes, Malone considered the legal opinion, which greatly reduced their tax liability. In 2004, the IRS received a list of the law firm’s clients who had employed this tax-advantaged investment structure, took the position that BASR “lacked economic substance” because its “principal purpose . . . was to reduce substantially the present value of its purported partners’ . . . aggregate federal tax liability,” and adjusted the tax effect of the business sale. BASR sought summary adjudication of its readjustment and refund claim, arguing that the adjustments and increased tax liability were untimely. The Federal Circuit agreed with the Claims Court that section 6501(a)’s three-year statute of limitations barred the IRS from administratively adjusting, in 2010, the 1999 tax return. Suspension of the limitation applies only when the taxpayer, not a third party, acts with the requisite “intent to evade tax.” View "BASR P'ship v. United States" on Justia Law