Thursday, August 29, 2013
Seventh Circuit Joins Majority of Circuits in Upholding Valuation Misstatement Penalties in DAD Tax Shelter
Superior Trading LLC et al. v. Commissioner, Nos. 12-3367 to 12-3371 (7th Cir. Aug. 23, 2013) (Posner, J.):
There is a disagreement among courts of appeals concerning the applicability of the penalties for misstating valuation when the transaction involving the overvalued asset is itself disregarded because it lacks economic substance. Compare, e.g., Crispin v. Commissioner, 708 F.3d 507, 516 n. 18 (3d Cir. 2013); Gustashaw v. Commissioner, 696 F.3d 1124, 1136-37 (11th Cir. 2012), and Fidelity Int'l Currency Advisor A Fund, LLC v. United States, 661 F.3d 667, 672 (1st Cir. 2011), with Keller v. Commissioner, 556 F.3d 1056, 1059-61 (9th Cir. 2009), and Heasley v. Commissioner, 902 F.2d 380, 383 (5th Cir. 1990). The majority view, which we now join, is that a taxpayer who overstates basis and participates in sham transactions, as in this case, should be punished at least as severely as one who does only the former. The Supreme Court has granted certiorari to resolve the circuit conflict. United States v. Woods, 133 S. Ct. 1632 (2013).