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In this issue:

December 2009 Volume II, Issue 10

Focus on Tax Controversy and Litigation

Editor’s Note

Dear Readers,

On December 3, 2009, Dewey & LeBoeuf held its Fifth Annual Year-End Tax Conference and Celebration. The event was a great success, and we would like to thank all who participated and attended.

One of the topics we covered at the conference was Textron and the IRS’s policy of restraint with respect to tax accrual workpapers. Since the conference, we have heard rumors that the IRS may be announcing a new policy of restraint with respect to requests for tax accrual work papers early next year. The details of the new policy remain unknown, but we will keep you posted.

Dewey & LeBoeuf’s Tax Controversy and Litigation Group would like to wish everyone a happy and healthy holiday season!

2 Dewey & LeBoeuf Holds Fifth Annual Year‑End Tax Conference and Celebration

3 New Trend: Government Requesting Jury Trials in Tax Cases

5 DOJ Seeking Identities of Stanford Group’s US Investors

6 Global Crackdown on Tax Evasion

8 Details of Criteria Used to Identify Individuals to Be Turned Over to the US Government in UBS Litigation; United States Looking to Conduct Joint Audits with Treaty Partners

10 IRS Commissioner Shulman Speaks on the Role of Corporate Boards of Directors with Respect to Overseeing Tax Risk

12 IRS Explains Strategy to Improve Withholding Tax Compliance

13 Lawmakers Seek to Modify Tax Shelter Penalties Created in 2004

14 District Court Finds Partnership Contribution Constituted a Disguised Sale but Statute of Limitations Barred Assessment

15 Current Status of Docketed Foreign Tax Credit Cases

16 General Electric Capital Canada, Inc. v. The Queen

17 District Court Grants Government’s Motion to Dismiss in Refund Case

19 Fifth Circuit Affirms Decision Upholding the Disallowance of a “Midco” Tax Shelter Transaction

22 IRS Coordinates Its Position Regarding Six‑Year Statute of Limitations Regulations

23 Overview of the Treasury Department’s 2009‑2010 Priority Guidance Plan

Dewey & LeBoeuf LLP | Focus on Tax Controversy and Litigation

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December 2009

On December 3, 2009, Dewey & LeBoeuf hosted its Fifth Annual Year-End Tax Conference and Celebration. The Tax Controversy and Litigation Panel was moderated by Lawrence Hill and included partner Mark Allison, Jack Burns of Citigroup Global Markets Inc., Edward Grady Jr. of JPMorgan Chase & Co., Philip Jacobs of Barclays Capital Inc., and Edward Park of American Interna-

tional Group, Inc. Topics covered included a status update on foreign tax credit litigation, privilege devel-opments, remarks Commissioner Shulman made at the Corporate Governance Conference, the IRS’s offshore tax compliance initiative and international discovery mechanisms, economic substance doctrine devel-opments, and developments with respect to withholding tax issues.

Dewey & LeBoeuf Holds Fifth Annual Year‑End Tax Conference and Celebration

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In pleadings recently filed by the government in two foreign tax credit (“FTC”) generator tax cases, the government opted out of traditional bench trials and instead demanded that the cases be tried by jury. This is a noteworthy development and indic-ative of a new government strategy in tax litigation involving corporate taxpayers. The only previous civil tax case in recent memory involving the government’s demand for a jury trial was the Fifth Third case.1

Fifth Third involved a series of lease-in lease-out transactions (“LILO” transactions) in which Fifth Third reported rent income received and deducted rent, amortization, and interest expenses. The IRS challenged the LILO transactions, arguing, in part, that the loans to Fifth Third did not constitute genuine indebtedness and the transac-tions lacked economic substance. The jury returned a verdict in favor of the government. The jury found that although Fifth Third obtained a genuine leasehold interest in the equipment, (i) the loans to Fifth Third did not constitute genuine indebted-ness to support an interest expense deduction and (ii) the LILO transac-tions did not appreciably affect Fifth Third’s economic interest, aside from providing tax benefits, and thus lacked economic substance.

1. Fifth Third Bancorp & Subsidiaries v. United States, No. 05-350 (S.D. Ohio Apr. 18, 2008).

The government seemingly believes that, in certain cases, a jury as the finder of fact (as opposed to a judge) would be beneficial to its case. The cases to date involving jury demands have one commonality — the taxpayers are financial institutions. The government must feel that there will be jury backlash against financial institutions because of the recent economic crisis. This trend is prob-lematic because the complexity of the legal and factual issues in these cases is not conducive to ready comprehension by a jury that is likely drawn from a pool of people predom-inantly unsophisticated in tax and financial matters, many of whom may not be college educated. This hardly is representative of trial by a jury of “your peers.” And while it is common for plaintiffs in tort actions to demand jury trials against large corporations — because of the jury risk to corpo-rate defendants — it is a different proposition when the government demands a jury in a tax refund suit. This is because the IRS’s charge is to collect the correct amount of tax due and owing, not a dollar more. The imposition of a jury in complex tax cases brings with it the legiti-mate risk that the IRS may obtain more than the amount to which it is legally entitled because of the lack of sophistication and inherent preju-dices and predilections of juries. The IRS may win cases this way, but the system will lose if unfair or inequitable results are obtained in this regard.

The two cases in which the govern-ment has demanded jury trials include a suit filed by American International Group (“AIG”) pending in federal district court in the Southern District of New York in which AIG is seeking a tax refund related to so-called “FTC-generator” trans-actions. The Acting United States Attorney demanded a trial by jury pursuant to 28 U.S.C. § 2402.2 Similarly, in Sovereign Bancorp, Inc. v. United States,3 a tax refund suit in the United States District Court for the District of Massachusetts also involving FTC generators, the Acting United States Attorney demanded a jury trial pursuant to Rule 38(b) of the Federal Rules of Civil Procedure.

Taxpayers have no constitutional right under the Seventh Amend-ment to a jury trial in a tax case. By statute, however, any refund action filed in federal district court against the United States under 28 U.S.C. § 1346(a)(1) shall, at the request of either party to the action, be tried by the court with a jury. The right to a jury trial in tax cases is limited to refund suits brought in federal district court. The district courts are bound by the decisions of the US Supreme Court and of the court of appeals

2. American Int’l Group, Inc. v. United States, No. 09 Civ. 1871 (S.D.N.Y. July 9, 2009).3. For more information, see “Sovereign Bancorp, Inc. v. United States: Bank Seeks Refund Following IRS Denial of Foreign Tax Credits,” Focus on Tax Controversy and Litiga-tion, July 2009, at 19-20.

New Trend: Government Requesting Jury Trials in Tax Cases


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December 2009

New Trend: Government Requesting Jury Trials in Tax Cases (cont’d)

for the circuit in which the district is located.

Unlike the federal district courts, the Tax Court and the Court of Federal Claims are courts of limited jurisdiction in which taxpayers are not entitled to a jury trial. The Tax Court is bound by the precedent of the federal court of appeals in the geographic jurisdiction in which the taxpayer is located whereas the Court of Federal Claims is bound by the precedent of the US Court of Appeals for the Federal Circuit. Thus, forum selection in tax disputes is vitally important because, in addi-tion to determining what precedents will govern the dispute, the forum selected determines the parties’ rights to demand a jury trial.

Some earlier FTC-generator cases were filed in the Tax Court.4 However, in both AIG and Sovereign Bancorp, the taxpayers chose to litigate their

4. For more information, see “FTC Cases Currently being Litigated,” Focus on Tax Controversy and Litigation, Dec. 19, 2008, at 14-15.

disputes in federal district court but, as is the norm, did not demand jury trials. In the case of FTC-generator transactions, the IRS has sought to challenge the transactions using (1) the substance over form doctrine; (2) the economic substance or sham transaction doctrine; (3) the step transaction doctrine; (4) debt versus equity principles; (5) section 269;5 (6) Treasury Regulation section 1.701-2, partnership anti-abuse rules; and (7) Treasury Regulation section 1.704-1, partnership substantial economic effect rules. These are difficult concepts to explain to a jury. The argument that a jury is incapable, inefficient, or error-prone often has been raised when the matter involves such complex transactions, and federal judges have denied jury trials in cases that were too complicated for a jury to decide.6

5. Unless otherwise indicated, section refer-ences are to sections of the Internal Revenue Code of 1986, as amended (the “Code”), and references to the regulations are to the regula-tions promulgated thereunder.6. See, e.g., Bernstein v. Universal Pictures, Inc., 79 F.R.D. 59 (S.D.N.Y. 1978).

While many corporate taxpayers have often sought to litigate their tax claims in federal district court, satisfied with the opportunity to have the case decided by a federal judge, the government is compli-cating that choice by demanding jury trials. No doubt this is a tactic to steer taxpayers to the Tax Court and Court of Federal Claims — both courts of national jurisdiction. Deci-sions in those courts have far more precedential value than a decision in a federal district court, which is not even binding on another judge in the same federal district. The govern-ment views the judges in the Tax Court and Court of Federal Claims as more predictable and government friendly than judges in the federal district courts and is attempting to utilize the current economic crisis to its tactical advantage. Consequently, forum selection in tax cases has become more complicated and chal-lenging than ever.

– L. Hill, R. Nessler

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On December 2, 2009, the Depart-ment of Justice (the “DOJ”) filed an ex parte petition with the District Court for the Northern District of Texas for leave to file a “John Doe” summons in connection with the government’s proceedings against the Stanford Group Co. and related entities (the “Stanford Group”).7 The DOJ is seeking to file the John Doe summons on the Stanford Group’s court-appointed receiver to obtain the identities of US persons that directly or indirectly had an interest in, or signatory or other authority over, any foreign accounts at or through Stanford International Bank, Ltd., an affiliated offshore bank of the Stan-ford Group, from December 31, 2002 through December 31, 2008 (the “US investors”). In February, the Securities and Exchange Commission charged R. Allen Stanford, other Stanford Group executives, and three Stanford Group entities with orchestrating a multi-billion dollar investment fraud scheme centered on certificates of deposit.

In the ex parte petition, the DOJ stated that as part of its Offshore Compliance Initiative the Internal

7. Sec. and Exch. Comm’n v. Stanford Int’l Bank Ltd. (In re Tax Liabilities of John Does), No. 3-09-CV-0298-N, (N.D. Texas filed Dec. 2, 2009).

Revenue Service (“IRS”) is inves-tigating the Stanford Group’s US investors. The DOJ argued that there is reasonable basis to believe that there has been significant noncom-pliance with the US internal revenue laws requiring the reporting of income earned in foreign financial accounts and the disclosure of interests in foreign accounts by the US investors. As part of the DOJ’s filing, the IRS attested that approximately 15,000 to 17,000 Report of Foreign Bank and Financial Accounts (“FBAR”) disclosures should have been filed annually by the US investors but that only 1,000 to 2,000 FBARs have been filed annually. According to the IRS and DOJ, these figures suggest significant noncompliance among the Stanford Group’s US investors. Further, the DOJ argued that there was a reasonable basis for believing that in the vast majority of cases, interest income earned by the US investors on their foreign financial accounts was not reported to the IRS. In the petition, the DOJ argued that the John Doe summons is necessary because the information that the DOJ seeks to obtain is not readily available from other sources, but is available from the Stanford Group’s court-appointed receiver.

The DOJ’s attempt to obtain a John Doe summons with respect to the Stanford Group’s US investors mirrors the use of similar petitions in other DOJ and IRS cases involving offshore accounts held by US persons, including the government’s ongoing investigation of potential tax evasion by US accountholders of UBS.

– G. Green

DOJ Seeking Identities of Stanford Group’s US Investors


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December 2009

Spurred by a call for action and the threat of sanctions from the Group of Twenty (“G-20”) and the Organisa-tion for Economic Development and Cooperation (“OECD”),8 a global crackdown on offshore tax evasion has gained force in recent months, with a number of countries taking steps to increase transparency in bank records, track down taxpayers who are hiding money offshore, and penalize tax evaders.

The OECD and the G-20 have put significant pressure on countries to endorse and implement principles of transparency and exchange of information developed by the OECD’s Global Forum on Transparency and Exchange of Information (“Global Forum”). The principles generally provide for full exchange of informa-tion on request in all tax matters (the “OECD Standard”). As a result, a number of jurisdictions that had been unwilling to endorse the OECD Standard in the past, including several countries previously identified as uncooperative tax havens, have recently endorsed, and taken steps to implement, the OECD Standard. The OECD reports that the OECD

8. See “G-20 Continues Crackdown on Tax Havens as OECD Continues to Promote Tax Transparency,” Focus on Tax Controversy and Litigation, Sept. 2009, at 3-4.

Standard is now endorsed by all countries surveyed by the Global Forum.9 Furthermore, between its September and December progress reports, the OECD identified 12 new jurisdictions — Aruba, Austria, Belgium, Bermuda, the British Virgin Islands, Bahrain, the Cayman Islands, Luxemburg, Monaco, Netherlands Antilles, San Marino, and Switzer-land — as having made substantial progress on implementing the OECD Standard.10 More than 120 tax information exchange agreements have been announced or signed since last November, and more than 60 tax treaties have been negoti-ated or renegotiated since April, to incorporate principles of the OECD Standard. 11

In addition, individual countries have begun to implement various approaches to intensify the hunt for tax evaders. The United States recently launched its Global High Wealth Industry Group, a special task force that will target wealthy taxpayers in an attempt to shed light on the various techniques used to

9. Information Brief, Overview of the OECD’s Work on Countering International Tax Evasion 3 (Dec. 8, 2009), available at http://www.oecd.org/dataoecd/32/45/43757434.pdf.10. Id. 11. Id. at 2.

hide income.12 In November, South Korea launched a similar task force, the Offshore Compliance Enforce-ment Center (“OCEC”), which is charged with tracking down hidden assets abroad.13 The OCEC already has had some success: South Korea’s National Tax Service recently announced that it has identified 39 offshore tax evasion cases and imposed a total of 153.4 billion won ($132 million) in back taxes on 313.4 billion won ($269 million) of undeclared income.14 Another such task force, New Zealand’s High Wealth Individual unit (“HWIU”), collected NZ$81 million (approxi-mately $59 million) this year, bringing its total amount collected since it was established in 2003 to NZ$300 million (approximately $218 million).15 The recent increase in collections by New Zealand’s HWIU may be linked

12. See “IRS and Treasury Officials Discuss Intent to Focus on International Issues,” Focus on Tax Controversy and Litigation, Nov. 2009, at 17.13. James Lin, “South Korea Launches Task Force to Crack Down on Offshore Cheats,” BNA Daily Tax Report, Nov. 19, 2009. 14. “South Korea Makes Headway in Crack-down on Tax Evasion, Seeks Millions in Back Taxes,” BNA Daily Tax Report, Dec. 11, 2009.15. Inland Revenue Media Release, High Wealth Individuals Pay an Extra $81 Million (Nov. 23, 2009), available at http://www.ird.govt.nz/aboutir/media-centre/media-releases/2009/media-release-2009-11-23.html.

Global Crackdown on Tax Evasion

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to another method of combating tax evasion employed by France and Germany — securing names and account numbers from “rogue employees” in Swiss and Liechten-stein banks.16 Apparently a number of wealthy New Zealand citizens were named in banking information sold to German tax authorities.17 Meanwhile, Italy has employed yet another tactic — a series of raids on branches of Swiss banks in Italy.18

An additional approach taken by several countries, including the United States, Australia, the United Kingdom, and France, is the imposi-tion of temporary tax amnesties to bring forward taxpayers who are hiding income offshore, generally in anticipation of increased penalties or enforcement going forward. The United States offered a voluntary disclosure program earlier this year that allowed taxpayers to come

16. Paul Betts, “The French Stocking Filler that Sheds Light on Tax Havens,” Financial Times, Dec. 10, 2009, available at http://www.ft.com; see also “Bank Confirms Employee Theft of Data from Switzerland Branch,” BNA Daily Tax Report, Dec. 9, 2009.17. Rob Stock, “Rich Pickings for Taxman as Rich Pay Up,” Sunday Star Times, Nov. 22, 2009, available at http://www.stuff.co.nz.18. Paul Betts, “The French Stocking Filler that Sheds Light on Tax Havens,” Financial Times, Dec. 10, 2009, available at http://www.ft.com.

forward and pay tax plus interest and penalties, which was considered a mitigating factor in the decision of whether or not to recommend criminal prosecution.19 Australia’s program similarly allows taxpayers with undeclared income held in tax havens to approach the Australian Taxation Office anonymously for an indication of whether they would face criminal charges prior to what Tax Commissioner Michael D’Ascenzo has described as what will be an “all bets are off” crackdown after June 10, 2010.20 The United King-dom’s program, referred to as the New Disclosure Opportunity, allows taxpayers to come forward and pay tax plus interest and limited penalties on money hidden in bank accounts abroad.21 The program runs until next March, after which penalties of up to 200 percent of the unpaid tax will be levied on taxpayers who fail to declare their offshore accounts.22 In France, the budget

19. See “Voluntary Disclosure Program Appli-cable to Offshore Accounts,” Focus on Tax Controversy and Litigation, Mar. 2009, at 6-9.20. Ruth Williams, “Amnesty for Undeclared Offshore Income,” Sydney Morning Herald, Dec. 1, 2009, available at http://www.smh.com.au.21. Ian Pollack, “Tax Dodgers Told ‘The Game is Up’,” BBC News, Sept. 21, 2009, available at http://news.bbc.co.uk.22. “Offshore Tax Dodgers Face 200% Rise in Fines,” BBC News, Dec. 9, 2009, available at

minister warned that he has a list of 3,000 French citizens with money hidden in Switzerland and threatened prosecution for taxpayers who fail to come forward under their amnesty program, which is due to expire at the end of this month.23

This recent upsurge of interna-tional laws on offshore tax evasion amounts, in the words of OECD Secretary-General Angel Gurría, to “a quiet revolution … in international governance.”24

– A. Anderson

http://news.bbc.co.uk.23. Paul Betts, “The French Stocking Filler that Sheds Light on Tax Havens,” Financial Times, Dec. 10, 2009, available at http://www.ft.com.24. Angel Gurría, “The End of the Tax-Haven Era,” The Guardian, Aug. 31, 2009, available at http://www.guardian.co.uk.

Global Crackdown on Tax Evasion (cont’d)


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December 2009

On November 17, 2009, the IRS released the previously unpublished annex to the US-Swiss agreement (“Annex”) that contains the criteria used to identify approximately 4,500 US taxpayers with accounts at UBS whose names will be turned over to the IRS.25

According to the criteria set out in the Annex, the United States was required to send a request for exchange of information pursuant to the US-Swiss treaty, but was allowed to do so without the use of specific names or other clear identification ordinarily required when making such treaty requests. Instead, the following information was determined to be sufficient to satisfy the identification requirement: (1) any UBS client that is a US domiciliary and who directly held and beneficially owned “undis-closed (non-W-9) custody accounts” and “banking deposit accounts” with UBS during any part of 2001 through 2008 in excess of CHF 1 million (approximately $960,000) and for which a reasonable suspi-cion of “tax fraud or the like” can be demonstrated; or (2) any US person (regardless of domicile) who established or maintained during

25. For previous coverage of the US-Swiss agreement, see “Details of the UBS-IRS Settle-ment Released,” Focus on Tax Controversy and Litigation, Sept. 2009, at 2.

the period of 2001 through 2008 “offshore company accounts” at UBS that such person beneficially owned and for which a reasonable suspi-cion of “tax fraud or the like” can be demonstrated.26

For purposes of the Annex, “tax fraud or the like” means (a) for purposes of those UBS clients described in (1), above, there is a reasonable suspi-cion that such taxpayers engaged in activities described in paragraph 10 of the US-Swiss protocol as presumptively fraudulent, including concealing assets and underreporting income through false documents or through a “scheme of lies” (in such cases, those persons with accounts in excess of CHF 250,000 (approximately $240,000) would also be subject to the request); and (b) instances in which acts of continued and serious tax offense have been committed and for which the Swiss Confederation may obtain information under its laws and prac-tices (as described in paragraph 10 of the US-Swiss protocol), including: (i) cases in which, for a period of at least three years (including at least

26. The complete text of the Annex can be found at “Annex to U.S.-Swiss Tax Informa-tion Exchange Agreement Providing Criteria for Granting Assistance Pursuant to Treaty Request,” BNATaxCore-International Docu-ments, Nov. 18, 2009, available at http://taxandaccounting.bna.com.

one year covered by the request), the US-domiciled taxpayer has failed to provide a Form W-9, and (ii) the UBS account generated an average annual revenue of at least CHF 100,000 (approximately $96,000) for any three-year period that includes at least one year covered by the request.27

In the case of “offshore company accounts” (described in (2), above), “tax fraud and the like” means (a) presumptively fraudulent conduct (as described in paragraph 10 of the US-Swiss protocol), including those activities that led to an underreporting of income and the concealment of assets based on a “scheme of lies” or the submission of incorrect or false documents (except those offshore company accounts holding assets less than CHF 250,000 during the relevant period); or (b) acts of continued and serious tax offense for which the Swiss Confederation may obtain information under its laws and practices (as described in para-graph 10 of the US-Swiss protocol), including cases where the US person failed to prove that such person has

27. The Annex defines revenues as gross income (interest and dividends) and capital gains (which, for purposes of assessing the merits of this administrative informa-tion request, are calculated as 50 percent of the gross sales proceeds generated by the accounts during the relevant period).

Details of Criteria Used to Identify Individuals to Be Turned Over to the US Government in UBS Litigation; United States Looking to Conduct Joint Audits with Treaty Partners

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met his or her statutory tax reporting requirements in respect of the person’s interests in such offshore company accounts upon notification by the Swiss Federal Tax Adminis-tration (“SFTA”) (i.e., by providing consent to the SFTA to request copies of the taxpayer’s FBARs from the IRS for the relevant years). Absent such confirmation, the SFTA would grant information exchange where (i) the offshore company account has been in existence for at least three years, including one year covered by the request, and (ii) generated on average annual revenues of at least CHF 100,000 for any three-year period that includes at least one year covered by the request.28

Within a week of releasing the criteria set out in the Annex, the Swiss tax authorities announced that deci-sions had been made on the first 500 UBS accounts targeted under the US-Swiss agreement.29 No details were given with respect to how many of those accounts would be subject

28. Revenues are defined as described in the previous footnote.29. Daniel Pruzin, “Swiss Authorities Say First 500 Decisions Made on Information Exchange in UBS Affair,” BNA Daily Tax Report (Nov. 25, 2009). Pursuant to the terms of the US-Swiss agreement, the SFTA was required to issue decisions on the first 500 accounts by the end of November 2009.

to the information exchange with the United States or the content of the decisions. Each account holder has 30 days in which to file an appeal with the Swiss Federal Administra-tive Court (“SFAC”) following receipt of the SFTA’s decision. If no appeal is filed, or if the appeal is filed but rejected, the SFTA will then turn the account holder’s name and account information over to the IRS. So far, the SFAC has received two appeals.30 To date, no account holder names or information have been turned over to the IRS.

During a teleconference in which the details of the Annex were released, IRS Commissioner Douglas Shulman also announced that, likely in response to the UBS litigation, approximately 14,700 taxpayers had participated in the IRS’s voluntary disclosure program (as opposed to the 7,500 participant estimate announced in October).31 Shulman

30. David Jolly, “Swiss Report First Appeals Filed in UBS Tax Case.” N.Y. Times, Dec. 16, 2008, available at http://www.nytimes.com/2009/12/17/business/global/17ubs.html?emc=etal.31. Alison Bennett, “Shulman Says About 14,700 Taxpayers Voluntarily Disclosed Offshore Assets,” BNA Daily Tax Report (Nov. 18, 2009). For previous coverage of the number of participants in the voluntary disclosure program, see “UBS Updates, US Government’s Focus on Offshore Tax Evasion,

noted that taxpayers from every continent except Antarctica partici-pated and that the IRS was “flooded with people coming in during the final days of the program.”

More recently, Shulman announced that the IRS is working with tax authorities in treaty partner countries to establish a method for conducting joint audits.32 Currently, the IRS is in the early stages of looking at proto-cols to facilitate the joint auditing process. Deputy IRS Commissioner Barry Shott said that he believes the Joint International Tax Shelter Information Center, a special agency created by the United States, Canada, Australia, Japan, and the United Kingdom to share informa-tion about tax shelters, will probably conduct the joint audits.

– E. Howard-Potter

and Related Developments,” Focus on Tax Controversy and Litigation, Nov. 2009, at 14; “Recent Developments Related to the UBS Litigation and Voluntary Disclosure,” Focus on Tax Controversy and Litigation, Oct. 2009, at 5. 32. Ryan J. Donmoyer, “IRS Studying ‘Proto-cols’ for Joint Audits With Other Countries,” Bloomberg.com, Dec. 10, 2009, at http://www.bloomberg.com/apps/news?pid=email_en&sid=afm_d0Arl564.

Details of Criteria Used to Identify Individuals to Be Turned Over to the US Government in UBS Litigation; United States Looking to Conduct Joint Audits with Treaty Partners (cont’d)


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December 2009

In recent remarks before both the 22nd Annual George Washington University International Tax Confer-ence on December 10 and the 2009 National Association of Corporate Directors Corporate Governance Conference on October 19, Commis-sioner Shulman addressed issues pertaining to corporate governance and the roles of boards of directors with respect to the oversight and management of tax risk.33 Noting that the IRS Commissioner custom-arily has not addressed the NACD’s corporate governance conference, Shulman discussed the “important role that boards of directors can play in overseeing tax risk and the tax strategies of corporations” and stated his intent to engage corporate leaders about their roles and respon-

33. Commissioner Shulman’s prepared remarks are available on the IRS Web site. See “Prepared Remarks of Commissioner of Internal Revenue Douglas H. Shulman Before the 2009 National Association of Corporate Directors Corporate Governance Conference, Washington, DC, October 19, 2009,” IR-2009-05, available at http://www.irs.gov/newsroom/article/0,,id=214451,00.html. Shulman spoke on the issue again on December 10, 2009 in his remarks before the George Washington University International Tax Conference. See “Prepared Remarks of Commissioner Douglas Shulman Before the 22nd Annual George Washington University International Tax Confer-ence,” IR-2009-116, available at http://www.irs.gov/newsroom/article/0,,id=216981,00.html.

sibilities with respect to conducting appropriate assessment and over-sight of tax risk. Shulman stated his proposition as follows:

“Tax expenses are like other major expenses. Manage them too loosely and you give up profit. Manage them too aggressively and there are bad consequences. The board must oversee how manage-ment manages them. That means some level of understanding, a set of policy principles and then a control system of reporting that assures the board that their policy is being carried out. Many corpo-rate boards do have a regular dialogue regarding tax risk with their CFOs, tax directors and external tax advisors. My goal is to promote good corporate gover-nance on tax issues and engage the corporate community in a dialogue about the appropriate role of the board of directors in tax risk oversight.”

Noting that taxes are one of the biggest expenses of a corporation and the importance in how they are managed, Shulman highlighted the fact that boards are a source of governance and oversight and hold management accountable. In that role, understanding the risk posture

of the company is critically important. Noting that many or most of his audi-ence members are not tax experts and were not installed on boards of directors due to their tax expertise as well as the difficulty in understanding the tax consequences of complex transactions, Shulman expressed his view that board members are criti-cally important in ensuring that the tax system “works well and is worthy of the confidence of the American people.”

Shulman stated that in order to increase board oversight of tax compliance in the face of limited time and competing business issues, boards can assess their corpora-tions’ tax risk profiles, internal controls, and relationships with their tax departments to help determine the tax matters of which they should be aware. Noting that FIN 48 is a “significant window” into a company’s tax risk, liability, and management, Shulman said that the reserve numbers reflect information that the audit committee needs to know and influence the tax posture taken by tax planners.

Shulman suggested that corporate leaders should have a mechanism to oversee tax risk as part of the gover-nance process. Making clear that

IRS Commissioner Shulman Speaks on the Role of Corporate Boards of Directors with Respect to Overseeing Tax Risk

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the IRS does not “intend to second-guess legitimate and thoughtful business decision-making by corporate leaders,” he provided the following examples of actions corpo-rate directors may choose to take in order to better oversee tax risk as part of the governance process:

Set a threshold confidence level for • taking a tax position;

Discourage or eliminate opinion • shopping by tax departments by having an independent tax firm, which has some direct dialogue with the board of directors, review major tax positions; and

Specifically address transfer pricing • and the relative profit allocated to low-tax jurisdictions, and make sure they reflect real economic contributions made in those jurisdictions.

Shulman further provided the following examples of questions that corporate directors may ask their tax directors and external auditors relating to FIN 48:

What was the process for identi-• fying uncertain tax positions and how do you know all material issues have been identified?

How did you go about determining • the maximum tax exposure relating to each uncertain tax position? What makes you comfortable that it accurately reflects your maximum exposure?

How did you go about quantifying • the likelihood of winning or losing uncertain tax positions? Do you plan to litigate the issue if the IRS challenges the position? Does the external auditor or tax advisor agree with the tax director’s assessment?

Could the company be subject • to potential penalties, such as for underpayment of tax, negligence, or worse? If so, are they appro-priately recorded, and perhaps more important, what does this say about how aggressive the company’s position is regarding those issues?

Shulman noted that there exist IRS programs currently in place that can provide boards with greater comfort that there will be no second-guessing in the future, including the compli-ance assurance program and the advance pricing agreement program.

He also explained that other govern-ments, including that of Australia,

have taken action to help corporate taxpayers employ sound manage-ment and governance practices on tax matters. The Australian Tax Office publishes a guide entitled “Gover-nance Guide for Board Members and Directors” that suggests questions which corporate directors can ask of management, such as the following: Is there a material difference between the losses reported for accounting purposes and the losses claimed for tax purposes? If so, can the differ-ence be satisfactorily explained? Is the structure and financing for your business or a major transac-tion complicated, perhaps more complex than necessary to achieve the commercial objectives? In addi-tion, the OECD recently released a guidance document outlining good corporate governance principles in relation to tax that is based on advice from governments worldwide.

– B. Harrison

IRS Commissioner Shulman Speaks on the Role of Corporate Boards of Directors with Respect to Overseeing Tax Risk (cont’d)


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December 2009

The IRS has implemented a four-phase strategy to address foreign withholding, which was identified as a Tier I issue by the IRS Large and Midsize Business Division (“LMSB”) in December 2008.34 Under current US law, all US persons (individuals, corporations, partnerships, etc.) making payments of certain types of US source income to foreign persons generally are required to report the payments to the IRS on a Form 1042, “Annual Withholding Tax Return for U.S. Source Income of Foreign Persons,” and to withhold tax on the payments at a rate of 30 percent. The US payer is often referred to as a US withholding agent.

On November 9, Lori Nichols, the LMSB Director (International Compli-ance, Strategy, and Policy), explained that the phases focus on (i) US with-holding agents who do not file Forms 1042, (ii) US withholding agents who do file Forms 1042, (iii) transac-tions involving total return swaps and notional principal contracts, and (iv) educational efforts geared towards US withholding agents and taxpayers.35

34. IRS News Release, IR-2008-137 (Dec. 8, 2008) (announcing that withholding tax is a Tier 1 issue).35. Amy S. Elliot, “IRS Explains Strategy for Improving Foreign Withholding Compliance,”

The first phase of the IRS strategy is aimed at detecting US withholding agents who have not reported certain US source payments to foreign persons despite being required to do so. Nichols stated that a preliminary pilot program identified a “very, very large percentage of entities” that fell within this category. The IRS currently is refining that program to identify an even greater number of such entities.

The second phase looks to whether those entities that have filed Forms 1042 did so correctly. Nichols indi-cated that this has generally been the case, but that some employers have been treating employees as indepen-dent contractors.

The third phase involves an IRS exploration of so-called “foreign withholding avoidance” using total return swaps and notional principal contracts. Nichols indicated that the IRS is focused on the “substance” of these transactions and on the relationships of the parties to the contracts.

For the fourth phase, the IRS has implemented an educational effort to inform taxpayers of their filing and reporting responsibilities. Entities that

Tax Notes Today, Nov. 12, 2009.

amend or fail to timely file a Form 1042 will be required to append to their filing a statement made under penalty of perjury explaining reason-able cause for the change or delay. Nichols indicated that the IRS may also request a statement detailing how the entities will ensure future compliance.

– W. Kellogg

IRS Explains Strategy to Improve Withholding Tax Compliance

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On November 16, 2009, Senate Finance Committee Chairman Max Baucus (D-MT), Ranking Member Chuck Grassley (R-IA), and Senator Mike Crapo (R-ID), along with House Ways and Means Oversight Subcom-mittee Chairman John Lewis (D-GA) and Ranking Member Charles Boustany (R-LA), introduced the “Small Business Penalty Relief Act of 2009” (“the Penalty Relief Act”) to limit the penalty for failure to disclose reportable transactions under section 6707A.36 Under the Penalty Relief Act, the 6707A penalty would be commensurate with the tax benefit received by the taxpayer from the reportable transaction. Specifically, the Penalty Relief Act would do the following:

Limit the 6707A penalty for failure • to disclose any reportable transac-tion to 75 percent of the tax benefit received, with a minimum penalty in the case of failure to disclose a listed transaction of $5,000 per transaction for individuals and $10,000 per transaction for businesses;Cap the penalty for failure to • disclose a listed transaction at $100,000 per transaction for individuals and $200,000 per transaction for businesses;

36. The text of the Penalty Relief Act is avail-able at http://waysandmeans.house.gov/media/pdf/111/LEWIGA_044_xml_6707A.pdf or at http://finance.senate.gov/sitepages/leg/111609%20leg%20S.%202771.pdf.

Cap the penalty for all other report-• able transactions at $10,000 for individuals and $50,000 for busi-nesses; andBe effective for penalties assessed • after December 31, 2006.

The Penalty Relief Act also would require the IRS, in consultation with the Treasury Department, to submit a report annually to the House Ways and Means Committee and the Senate Finance Committee on the penalties the IRS assessed during the preceding year under sections 6662A, 6700(a), 6707, 6707A, and 6708. The IRS would be required to submit the first report no later than June 1, 2010.

With the passage of the American Jobs Creation Act of 2004, Congress added section 6707A to the Code, which created a penalty for failure to disclose any reportable transac-tion. In the case of failing to disclose a listed transaction, the penalty is one of strict liability because the law imposes a fixed penalty of $100,000 for individuals for each failure to report and $200,000 for all other taxpayers, regardless of intent or culpability. Additionally, with respect to any listed transaction, the IRS has no authority to rescind the penalty.

Since any transaction must be reported at both the entity and individual level, the penalty has hit S corporation and partnership taxpayers hard. In particular, it has been widely reported that section

6707A, as it stands, has had an onerous effect on small businesses that unknowingly invested in listed tax shelter transactions. After hearing stories of small businesses being assessed 6707A penalties as high as $300,000 per year where the tax benefit received from the transaction was as little as $15,000, Congress in July 2009 sent a letter to IRS Commissioner Douglas Shulman requesting that the IRS exercise its administrative authority and suspend collection efforts of the penalty imposed on small businesses while Congress worked on a legislative solution. In July, Shulman announced that the IRS would suspend collec-tion efforts until September 30, 2009, for cases where the tax benefits resulting from any listed transactions are less than $100,000 for indi-viduals and $200,000 for all others. In September, he announced that the moratorium had been extended through December 31, 2009. The IRS has not given any indication that a further extension will be announced.

Additionally, notably not contained in the Penalty Relief Act is a provi-sion giving the IRS the authority to rescind or modify penalties for failure to disclose a listed transac-tion in certain cases. Nevertheless, according to Senator Baucus, the proposed 6707A legislation is about “tax fairness” and must move forward as quickly as possible.

—T. Ashford

Lawmakers Seek to Modify Tax Shelter Penalties Created in 2004


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December 2009

On December 14, 2009, the US District Court for the District of New Jersey ruled in favor of the debtors in a bankruptcy tax case, In re G-I Hold-ings, Inc.,37 holding that the statute of limitations barred the government from assessing tax even as the court agreed with the government that the 1990 transaction constituted a disguised sale rather than a valid partnership transaction.

The transaction involved the contri-bution of $480 million in assets of a chemicals business by two subsidiaries of the GAF Corporation (collectively, “GAF”) into a partnership (“RPSSLP”) with affiliates of Rhone-Poulenc, S.A., a French corporation. GAF subsequently assigned its 49 percent partnership interest to a trust that pledged the interests as collateral for a nonrecourse $450 million loan from an unrelated Swiss bank. Under the RPSSLP partnership agreement, the GAF trust was enti-tled to a priority return from RPSSLP sufficient to pay the interest due on the loan and the French general partner guaranteed the priority return. GAF subsequently declared bankruptcy and G-I Holdings, Inc. and other successors in interest (the “Debtors”) assumed GAF’s position in its dispute with the IRS over this and other transactions.38

37. No. 02-3082 (D.N.J. Dec. 14, 2009).38. There is an outstanding dispute regarding certain 1999 repo and swap transactions also related to the RPSSLP partnership, but the

The debtors asserted that the transaction constituted a nontaxable contribution to a partnership under section 721(a) and that neither the contribution nor the receipt of the loan proceeds constituted taxable income. The government countered that the transaction was a disguised sale under section 707(a)(2)(B) when the contribution and the loan proceeds are analyzed together.

The court agreed with the govern-ment’s characterization, finding that GAF’s “true intent was to disguise an asset sale as to minimize taxa-tion.” In reaching its conclusion, the court examined the following factors: (i) GAF’s risk of loss on the transac-tion was capped at $26.3 million; (ii) restructuring the asset sale as a partnership transaction resulted in GAF receiving less money and incurring increased transaction costs, which would not make sense unless GAF could receive tax benefits from the structure; (iii) Rhone-Poulenc initially offered an asset purchase and the parties spent time negotiating such an agreement before switching to the partnership transaction; and (iv) all the elements of section 707(a)(2)(B) were present to create a disguised sale. While the court ultimately conceded that the partner-ship contribution, viewed in isolation, represented a valid equity contribu-tion to a partnership, in the context of

court bifurcated the 1990 and 1999 disputes and has yet to rule on the 1999 issues.

the nonrecourse loan the provisions of section 707(a)(2)(B) compelled disguised sale treatment (“while the transactions were carefully structured to create the appearance that [the GAF trust] repaid the loan, all repay-ment came from the partnership or the other partners”).

While prevailing on the economic substance issue, the government ultimately lost due to the expiration of the statute of limitations. The govern-ment’s case rested on a finding that a six-year limitations period existed based on a greater than 25 percent omission of items of gross income under section 6501(e)(1). The dispute centered on the amount of “gross income” originally reported by the partnership, with the government arguing that the economic substance of the partnership essentially reduced the gross income of the partnership on GAF’s tax return to the amount received by GAF. The court disagreed and stated that section 6501(e)(1) required the mechanical applica-tion of a rule and allotted portions of RPSSLP’s gross income to GAF thereby reducing the understatement to less than the 25 percent required for an extension of the statute of limitations.

—E. Miller

District Court Finds Partnership Contribution Constituted a Disguised Sale but Statute of Limitations Barred Assessment

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Current Status of Docketed Foreign Tax Credit Cases

Currently, there are half a dozen FTC cases docketed in the Tax Court and various district courts. No cases currently are docketed in the Court of Federal Claims but, after the recent taxpayer-favorable decision in Consolidated Edison, taxpayers may consider the Court of Federal Claims a potential option.39

As discussed by members of the Tax Controversy and Litigation panel at Dewey & LeBoeuf’s Fifth Annual Year-End Tax Conference and Celebration on December 3, 2009, an advantage to litigating in the Court of Federal Claims includes the fact that the court will conduct an analysis of the whole transaction when evaluating whether a transaction has economic substance. In contrast, the Tax Court is bound by the standard imposed by the court of appeals to which a particular case is appealable and, depending on the circuit, that stan-dard may not be taxpayer-favorable.

Below is a list of currently-docketed FTC cases:

Sovereign Bancorp, Inc. v. • United States, No. 09-cv-11043: Docketed in the District of

39. Consolidated Edison Co. of New York Inc. v. United States, No. 06-305T (Fed. Cl. Oct. 21, 2009). For previous coverage of this case, see “Taxpayer Wins LILO Case in the Court of Federal Claims,” Focus on Tax Controversy and Litigation, Oct. 2009, at 15.

Massachusetts, appealable to the First Circuit40

Wells Fargo & Co. v. United States• , No. 09-cv-02764: Docketed in the District of Minnesota, appealable to the Eighth CircuitBank of New York Mellon Corp. • v. Commissioner, No. 26683-09: Docketed in the Tax Court, appeal-able to the Second CircuitHewlett-Packard Co. v. • Commissioner, No. 21976-07: Docketed in the Tax Court, appeal-able to the Fifth CircuitAmerican International Group, Inc. • v. United States, No. 09 Civ. 1871: Docketed in the Southern District of New York, appealable to the Second CircuitPritired 1 LLC v. United States• , Civ. No. 4:08-cv-00082: Docketed in the Southern District of Iowa, appealable to the Eighth Circuit.

Thus far, most of the cases are in the discovery stage and trials have been scheduled only in Hewlett-Packard (September 13, 2010) and Pritired (December 6, 2010). The govern-ment has requested a jury trial in both Sovereign and AIG.41 Another commonality shared by both Sover-eign and AIG is that the IRS has

40. For previous coverage of this case, see “Sovereign Bancorp v. United States: Bank Seeks Refund Following IRS Denial of Foreign Tax Credits,” Focus on Tax Controversy and Litigation, July 2009, at 19.41. For a discussion of the government’s practice of requesting jury trials, see the article within this issue entitled “New Trend: Govern-ment Requesting Jury Trials in Tax Cases.”

asserted accuracy-related penalties under section 6662 against these taxpayers.

A common feature across several of the cases is that, in addition to disallowing the FTCs claimed by the taxpayers on economic substance grounds and other judicial doctrines, the IRS has also disallowed interest expense and transaction cost deduc-tions related to the transactions.

Although there are similarities shared by some of the cases—Wells Fargo and Bank of New York Mellon, for example, both entered into a financing transaction known as the “STARS Transaction” in which a third party acted as the counterparty—the differences among the cases suggest that the government may have diffi-culty crafting a coherent settlement policy for other taxpayers based on the outcome of these FTC cases. This may be due, in part, to the fact that the government did not desig-nate all of the currently-docketed cases for litigation. The government previously had announced its intent to follow a “three and out” litigation strategy whereby it would identify what it believed to be the three most favorable FTC cases from the govern-ment’s perspective, litigate those cases, and establish a settlement policy for all other FTC transactions based on its expected victories in


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December 2009

those cases.42 The current roster of docketed FTC cases demonstrates that not all FTC transactions are the same. Nevertheless, these cases will doubtless be watched closely by other taxpayers with FTC transac-tions currently under audit.

– A. Minkovich

42. See “IRS Plans to Apply ‘Three and Out’ Litigation Strategy to FTC-Generator Cases,” Focus on Tax Controversy and Litigation, Nov. 17, 2008, at 3.

General Electric Capital Canada, Inc. v. The Queen

On December 4, 2009, in General Electric Capital Canada, Inc. v. The Queen,43 a case of first impression,44 the Tax Court of Canada ruled on the appropriate transfer pricing meth-odology to apply to a fee paid for a credit guarantee. Beginning in 1995, General Electric Capital Canada, Inc., a Canadian corporation (“GECC”), paid its indirect parent General Electric Capital Corporation, a United States corporation (“GECUS”), a 100 basis point fee in exchange for the guarantee by GECUS of GECC’s unsecured debentures and commercial paper. The amount of this fee was calculated on a quarterly basis and paid annually in the year following accrual. For the five tax years under consideration, the fee totaled approximately 136.4 million Canadian dollars.

GECC deducted the guarantee fees it paid each year in computing its Canadian taxable income and with-held tax at the rate of 10 percent from the guarantee fees paid to GECUS pursuant to the Canadian Income Tax Act (the “Act”) and Article XI of the income tax treaty between Canada and the United States. The Minister of National Revenue

43. [2009], 2009 TCC 563.44. Id. at [284].

disallowed the deductions for the guarantee fees in full and assessed additional withholding tax under Part III of the Act, based on the position that GECC received no economic benefit from the guarantee and the arm’s length price for the guarantee was consequently zero.

The parties and their experts presented several possible transfer pricing methodologies that a court might apply in determining a proper arm’s length price for a credit rating guarantee. The court ruled that deter-mining an arm’s length price was a question of fact and “of identifying the economically relevant characteristics of the transaction that may influ-ence the arm’s length parties in their negotiations.”45 The court applied the “yield curve” approach presented by the Crown, which compares the rate at which the borrower could issue debt without a guarantee against the rate at which the borrower could issue debt with the guarantee.46 The difference between these rates would represent an appropriate guar-antee fee. In creating a hypothetical transaction between “arm’s-length parties” against which to judge the appropriateness of the fee charged in

45. Id. at [198].46. Id. at [14].

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the transaction under consideration, the court ruled that it first needed to determine what GECC’s credit rating would have been with and without the guarantee, because the price of an arm’s-length guarantee would vary depending on the creditworthiness of the party seeking the guarantee.47

The court determined that GECC’s credit rating without the guarantee would have been approximately BBB-/BBB+, whereas it was AAA with the guarantee.48 The differ-ence between the rates payable by debtors with those credit ratings was approximately 183 basis points. Therefore, the court determined that 100 basis points was “equal to or below an arm’s length price in the circumstances, as [GECC] received a significant net economic benefit from the transaction.”49 Consequently, the court ordered that the assessments against GECC be vacated.

– K. Lucas50

47. Id. at [247].48. Id. at [305]. 49. Id.50. Kirstin Lucas is a tax associate in Dewey & LeBoeuf’s New York office.

District Court Grants Government’s Motion to Dismiss in Refund Case

On September 14, 2009, the US District Court for the Central District of California granted the United States’s motion to dismiss in a refund suit, holding the suit time-barred under 28 U.S.C. section 2401(a) which provides a general six-year limitations period for suits against the United States.51 The court rejected the taxpayer’s argument, supported by a 1955 Court of Claims deci-sion, that section 6532(a)(1) is the appropriate authority for the limita-tions period in a tax refund suit and, because it provides no time limit for a case in which the IRS never issues a notice of disallowance, the refund suit should be allowed.52

The facts of the case are simple. Sometime in the 1980s, the IRS determined that taxpayer David J. Wagenet owed unpaid taxes, and in 1987 the IRS levied his bank account to satisfy the outstanding amount. In March 1988, however, the IRS deter-mined that Wagenet was entitled to an abatement of taxes. Shortly there-after, Wagenet filed a refund claim. The IRS never acted on Wagenet’s

51. Order Granting Motion to Dismiss, Wagenet v. United States, No. 8:08 cv142 (C.D. Cal. 2009).52. Detroit Trust Co. v. United States, 131 Ct. Cl. 223 (Ct. Cl. 1955).

claim, however, and in 2008 he sued for a refund.

In granting the United States’s motion to dismiss, the court first analyzed the interplay between 28 U.S.C. § 2401(a) and section 6532(a)(1). 28 U.S.C. § 2401(a) provides that “every civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues.” Section 6532(a)(1) states that a taxpayer’s action for a refund shall not begin

“before the expiration of 6 months from the date of filing [an admin-istrative claim for a refund] … nor after the expiration of 2 years from the date of mailing … by the [IRS] to the taxpayer of a notice of disal-lowance …”

Putting the two statutes together, the court found that section 6532(a)(1) “establishes that an action for refund accrues 6 months from the date of filing the administrative claim” and, in cases in which a taxpayer has received a notice of disallowance, also provides a two-year limitations period. The court found that section 6532(a)(1)’s silence on the limita-tions period for a case in which no notice of disallowance is issued does


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December 2009

not give rise to an unlimited statute of limitations, however. Instead, the court found the “catchall statute of limitations period” in 28 U.S.C. § 2401(a) for “every civil case” would apply in such a situation.53

The taxpayer cited Detroit Trust Co., a case with similar facts that had been decided in favor of the taxpayer (and the only authority directly on point), for his position that section 6532(a)(1) provides the exclusive limitations period in refund suits. The court dealt with Wagenet’s argu-ment by briefly restating its analysis of the interplay between 28 U.S.C.

53. The court found that the words “every civil action” in 28 U.S.C. § 2401(a) “must be interpreted to mean what they say.” Id. (citing Nesovic v. United States, 71 F.3d 776, 778 (9th Cir. 1995)). The court also cited a 1941 Supreme Court opinion for the proposition that 28 U.S.C. § 2401(a) “places an outside limit on the period within which all suits might be initiated against the United States.” Id. (citing United States v. A.S. Kreider Co., 313 U.S. 443, 448 (1941)).

§ 2401(a) and section 6532(a)(1) and then stating that Detroit Trust Co. had been wrongly decided.

Although not raised by the taxpayer, the court discussed other tax cases that addressed 28 U.S.C. § 2401(a), which the court stated “contain language that seemingly supports a holding contrary to the Court’s.” In those cases, courts held that 28 U.S.C. § 2401(a) “does not apply to actions for tax refunds.”54 The court distinguished those cases on the ground that each involved taxpayers arguing that 28 U.S.C. § 2401(a) “allowed refund actions against the United States for six years after accrual despite the existence of other statutes with shorter limita-tions periods.” The court found that, in cases in which a shorter statute

54. Bruno v. United States, 547 F.2d 71, 74 (8th Cir. 1976); Hampton v. United States, 206 Ct. Cl. 422, 436 (Ct. Cl. 1975); Phoenix State Bank & Trust Co. v. Bitgood, 28 F. Supp. 899, 900 (D. Conn. 1939).

of limitations applied, 28 U.S.C. § 2401(a) had no application. In this case, however, no such shorter limi-tations period could apply because of the absence of a notice of disallow-ance. Accordingly, the court held that the catchall six-year statute of limita-tions provided in 28 U.S.C. § 2401(a) governed the taxpayer’s refund suit.

The taxpayer filed an appeal in the Ninth Circuit Court of Appeals on November 16, 2009.55

– K. Parsons56

55. Wagenet v. United States, No. 09-56800 (9th Cir. 2009).56. Kenneth Parsons is a tax associate in Dewey & LeBoeuf’s Washington, DC office.

District Court Grants Government’s Motion to Dismiss in Refund Case (cont’d)

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On November 10, 2009, the United States Court of Appeals for the Fifth Circuit affirmed the United States District Court for the Southern District of Texas’ summary judgment deci-sion in Enbridge Energy Co., Inc. v. United States,57 holding that the “Midco” tax shelter transaction of Enbridge Energy Company Inc. (formerly known as Midcoast Energy Resources, Inc. (Midcoast)) was a sham conduit transaction and that Midcoast was subject to the substan-tial understatement penalty under section 6662(d). The Fifth Circuit’s decision marks the first appellate court to disallow a Midco tax shelter transaction.

The transaction at issue was substantially similar to the transaction described in Notice 2001-16.58 In Notice 2001-16, the IRS first targeted Midco or intermediary shelters. The notice dealt with the use of an intermediary for the avoidance of corporate tax triggered on the sale of assets. The notice postulates a seller who wants to sell the stock of a corporation, a buyer who wants to purchase the assets, and an inter-mediary corporation. As described in the notice, the parties, pursuant to a

57. 2009 U.S. App. LEXIS 24713 (5th Cir. 2009), aff’g 553 F.Supp.2d 716 (2008).58. 2001-1 C.B. 730 (Feb. 26, 2001).

plan, undertake the following steps. The seller purports to sell the stock of his target corporation to the interme-diary corporation. The intermediary corporation, in turn, sells the target corporation’s assets to the buyer. The buyer claims a basis in the target corporation assets he now owns equal to his purchase price (i.e., a stepped-up basis). In one form of the transaction, the intermediary corpora-tion has tax losses or credits and the target corporation and the interme-diary corporation are members of an affiliated group that thereafter files a consolidated return to make use of those losses or credits against the corporate level gain triggered on the sale of the assets. In another form of the transaction, the intermediary corporation is an entity not subject to tax and the target corporation will liquate in a transaction that is not intended as a taxable liquidation, resulting in no reported gain on the intermediary corporation’s sale of the assets.

According to the notice, depending on the facts of the particular case, the IRS might challenge the purported tax results of the just described transactions on several grounds, including but not to one of the following:

The intermediary is an agent for • the seller and consequently for tax purposes, the target corpora-tion has sold assets while it is still owned by the seller;The intermediary is an agent for • the buyer and consequently for tax purposes the buyer has purchased the stock of the target corporation from the seller; orThe transaction is properly rechar-• acterized (e.g., to treat the seller as having sold assets or the target corporation as having sold assets while it is still owned by the buyer).

Alternatively, the IRS states in the notice that it might examine the intermediary corporation’s consoli-dated group to determine whether it may properly offset losses (or credits) against the gain (or tax) from the sale of assets.

The notice further states that the IRS might impose penalties on partici-pants in these transactions, or, as applicable, on persons who partici-pate in the promotion or reporting of these transactions, including the accuracy-related penalty under section 6662, the return preparer penalty under section 6694, the promoter penalty under section 6700, and the aiding and abetting penalty under section 6701. Finally, the

Fifth Circuit Affirms Decision Upholding the Disallowance of a “Midco” Tax Shelter Transaction


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December 2009

notice warns that the IRS views the transaction and substantially similar ones as listed transactions, triggering the disclosure, registration and list maintenance requirements.

The transaction at issue in the present case was entered into between Midcoast, the sole share-holder of The Bishop Group, Ltd (Bishop), and K-Pipe Merger Corpo-ration (K-Pipe). Midcoast and Bishop were in the business of owning and operating natural gas pipelines. Beginning in 1999, Bishop’s sole shareholder decided he wanted to sell Bishop. Midcoast was an interested buyer but it desired to purchase Bishop’s assets with a cost basis. Bishop’s sole share-holder insisted on a direct stock sale because such a sale would be substantially more beneficial to him from a tax perspective than a sale of only Bishop’s assets. Midcoast consulted with an outside tax advisor who suggested that Midcoast pursue a Midco transaction whereby the sole shareholder of Bishop would sell his stock to a third party, and the third party would in turn sell Bishop’s assets to Midcoast. The advisor suggested that Midcoast use Fortrend International LLC (Fortrend), an investment bank, as the interme-diary to the transaction.

Upon Midcoast agreeing to do this, Fortrend began negotiating with Bish-op’s sole shareholder, with Midcoast and its tax advisor participating in the negotiations. Fortrend created an entity, K-Pipe, specifically for the transaction. K-Pipe had no assets of its own, nor did it conduct any prior business. Financing for the purchase of the Bishop stock was set up, with a loan to K-Pipe being secured by Midcoast’s assets. In October 1999, K-Pipe purchased all of the sole shareholder’s stock in Bishop. After a downstream merger of K-Pipe into Bishop, Bishop (which changed its name to K-Pipe Group) sold the Bishop assets to Midcoast the day after the stock purchase. K-Pipe apparently offset the gain from the sale of the Bishop stock from high basis, low fair market value assets its parent company contributed to K-Pipe. Midcoast claimed a cost basis in the Bishop assets and began taking depreciation and amortization deductions in accordance with this basis in 1999.

The IRS partially disallowed Midcoast’s claimed deductions, determining that the form of the transaction should have been disre-garded and treating it as though Midcoast had directly purchased the stock of Bishop (and to have

liquidated Bishop). The IRS allowed Midcoast to claim a carryover basis in the assets and make deductions based on that amount. The IRS assessed a 20 percent penalty due to the substantial understatement of taxes.

On appeal, relying primarily on Commissioner v. Court Holding Co.,59 United States v. Cumber-land Pub. Serv. Co.,60 Davant v. Commissioner,61 Blueberry Land Co. v. Commissioner,62 and Reef Corp. v. Commissioner,63 the court undertook a substance over form analysis and analyzed the transaction at issue under the conduit theory of the substance over form doctrine. The court found that the uncon-troverted evidence supported the determination that the IRS properly disregarded the form of the transac-tion and treated it as a direct stock sale because it was a sham conduit transaction and Midcoast could offer no adequate non-tax reasons for using K-Pipe. Midcoast, therefore, was not entitled to claim a stepped-up basis in the Bishop assets.

59. 324 U.S. 331 (1945).60. 338 U.S. 451 (1950).61. 336 F.2d 874 (5th Cir. 1966).62. 361 F.2d 93 (5th Cir. 1966).63. 368 F.2d 125 (5th Cir. 1966).

Fifth Circuit Affirms Decision Upholding the Disallowance of a “Midco” Tax Shelter Transaction (cont’d)

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Specifically, the court pointed to the following uncontroverted facts. Bish-op’s sole shareholder sought to sell his stock in Bishop, knowing that a direct asset sale would have negative tax consequences for him. When the sole shareholder rejected Midcoast’s offer, Midcoast asked its tax advisor for suggestions about improving its bid. The advisor suggested that the parties use a third-party intermediary for the transaction and suggested Fortrend, a corporation that had done a number of conduit transac-tions. The advisor then brought Fortrend into the picture. Rather than purchasing the stock and selling the assets itself, Fortrend formed a special purpose entity, K-Pipe, which existed for no other reason than to accomplish the transaction and it did no business before or after the transaction. K-Pipe’s financing to purchase the Bishop stock was wholly secured by Midcoast’s assets. Thus, the only inference to be made was that K-Pipe was merely an inter-mediary without a bona fide role in the transaction.

The court also rejected Midcoast’s three purported business reasons why it engaged in a Midco trans-action. Midcoast first argued that K-Pipe sought to earn a profit. The court, however, observed how this assertion “did not answer the ques-tion of why any party was willing to pay K-Pipe to be an intermediary” and the fact that an intermediary receives a fee or makes a profit does not prevent finding that the trans-action was a sham, in any event. Midcoast also argued that it engaged in a Midco transaction because it “wanted to acquire and operate the Bishop pipeline assets at a price it was willing and could afford to pay.” The court summarily rejected this argument, stating that this was not a tax-independent business consid-eration. Lastly, Midcoast contended the transaction limited its exposure to litigation because “had it purchased the Bishop stock, it would have been liable for claims against Bishop. By purchasing the assets ..., it could avoid liability on known and unknown claims that might be asserted against the Bishop corporate entity.” The

court again summarily rejected Midcoast’s last argument, noting that this does not explain why an interme-diary was necessary.

The court also upheld the imposition of the 20 percent understatement penalty and because the transac-tion at issue was a “tax shelter” as defined in section 6662(d)(2)(C), the substantial authority exception did not apply. The court noted that, in any event, there was not substan-tial authority because the available authority from Supreme Court and Fifth Circuit cases indicated that the transaction, motivated solely by the avoidance of tax, would be disre-garded and that Midcoast would not be entitled to claim a stepped-up basis in the Bishop assets.

– T. Ashford

Fifth Circuit Affirms Decision Upholding the Disallowance of a “Midco” Tax Shelter Transaction (cont’d)


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December 2009

As we previously reported,64 the Treasury Department and the IRS issued temporary and proposed regulations with respect to sections 6501(e)(1)(A) and 6229(c)(2) on September 24, 2009. The regula-tions provide that an overstatement of basis constitutes an omission of gross income for purposes of the extended statute of limitations provisions. The temporary regula-tions are effective for taxable years for which the “applicable period for assessing tax” had not expired prior to September 24, 2009.

On November 23, 2009, the Office of Chief Counsel issued Notice CC-2010-001. The notice indi-

64. “Regulations Issued with Respect to the Six-Year Statute of Limitations for Omissions from Gross Income,” Focus on Tax Contro-versy and Litigation, Oct. 2009, at 11.

cates that the “applicable period for assessing tax” should be interpreted in accordance with the temporary regulations. Thus, the temporary regulations are effective for taxable years for which a six-year limita-tions period had not expired prior to September 24, 2009. The notice also establishes procedures by which the IRS will “coordinate Counsel’s posi-tion” for docketed Tax Court cases in which the temporary regulations apply. Specifically, “[the IRS’s office of Chief Counsel (Procedure and Administration)] has assembled a cadre of attorneys” to monitor the cases and to provide the Tax Court with notice of the issuance of the temporary regulations through such means as filing motions or amending answers.

– R. Partain

IRS Coordinates Its Position Regarding Six‑Year Statute of Limitations Regulations

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On November 24, 2009, the Depart-ment of the Treasury issued its 2009-2010 Priority Guidance Plan containing 315 projects that Treasury seeks to complete over a twelve-month period spanning from July 2009 until July 2010.65 Treasury further announced its intent to update and republish the Priority Guidance Plan throughout the year.

Among others, the following antici-pated projects were listed in the 2009-2010 Priority Guidance Plan:

Guidance on issues relating to • the foreign tax credit, including treatment of foreign and domestic losses, the computa-tion of earnings and profits, and final regulations under section 905(c) regarding foreign tax redeterminations; Guidance under section 1441 on • qualified intermediaries and other withholding issues;Regulations under sections 6229(c)• (2) and 6501(e) regarding the definition of “omission from gross income” (temporary and proposed regulations were published September 28, 2009);Final regulations under section • 6231 regarding the special enforcement exception to the application of the TEFRA part-nership procedures (proposed

65. The complete version of the 2009-2010 Priority Guidance Plan is available on the IRS Web site at www.irs.gov/foia/article/0,,id=181687,00.html.

regulations were published February 13, 2009);Guidance relating to rescission of • notices of determination issued under sections 6320 and 6330;Regulations under section 6501(c)• (10) regarding the extension of the statute of limitations for assessment relating to failures to report listed transactions (interim guidance issued as Revenue Procedure 2005-26);Regulations under sections 6662A, • 6662, and 6664 regarding accu-racy-related penalties relating to understatements (interim guidance issued as Notice 2005-12);Guidance under sections 6694 and • 6695 relating to return preparer penalties (final regulations were published December 22, 2008);Guidance pertaining to enhancing • return preparer compliance;Guidance under section 6702 • relating to reduction of penalties for frivolous tax submissions;Regulations under section 6707 • regarding the penalty for failure to furnish information as required by section 6111 (proposed regula-tions were published December 19, 2008);Guidance under section 6707A • regarding the penalty for failure to disclose reportable transactions (prior guidance was contained in Notice 2005-11, Revenue Procedure 2005-51, Revenue Procedure 2007-21, and Revenue Procedure 2007-25; temporary

and proposed regulations were published September 11, 2008);Regulations under section 6708 • regarding the penalty for failure to make a list of advisees available as required under section 6112 (interim guidance contained in Notice 2004-80);Revisions to Circular 230 regarding • practice before the IRS;Guidance regarding the proce-• dures for the imposition of a monetary penalty under Circular 230 (prior guidance contained in Notice 2007-30);Proposed regulations under • section 6015 updating the existing regulations regarding relief from joint and several liability;Guidance under section 9100;• Guidance on prepaid forward • contracts (earlier guidance contained in Notice 2008-02 and Revenue Ruling 2008-01, both published January 14, 2008);Regulations and guidance with • respect to consolidated returns; andRegulations and guidance with • respect to employee benefits and executive compensation.

– Z. Ziering

Overview of the Treasury Department’s 2009‑2010 Priority Guidance Plan


24 |

December 2009

Personnel Changes

On December 7, 2009, the IRS announced that Victor Song will become the new chief for IRS Criminal Investigation, the IRS’s law enforcement arm responsible for investigating and assisting in the prosecution of criminal tax evasion, money laundering, and narcotics-related financial crime cases. Mr. Song, who currently serves as CI deputy chief, will be replacing Eileen Mayer, who is retiring from the IRS in January. Rick Raven will take over as CI deputy chief.

Upcoming Events

On January 14, 2010, partners Lawrence M. Hill and Hershel Wein will serve as faculty for a Strafford CLE/CPE webinar/teleconference on “Castle Harbour Decision: Legitimacy of Partnerships with Tax Benefits: Structuring the Entity to Withstand IRS Scrutiny and Maximize Tax Advantages.” The panel will address the following key questions: How will the Castle Harbour ruling impact the way courts view the legitimacy of partnership structures with tax benefits? Will this decision impact future IRS challenges of partnership structures with tax benefits? What proactive steps should counsel take on behalf of current and prospective clients in light of the Castle Harbour ruling? For additional information, visit www.straffordpub.com.

Beginning on January 25-26, 2010 at the Westin Colonnade in Coral Gables, FL, Lawrence M. Hill and counsel Tamara Ashford will be speaking at a series of BNA/CITE conferences on “Resolving IRS Tax Controversies: How to Prepare for Audits and Appeals, Resolve IRS Disputes, Mitigate Penalties and Understand Alternative Dispute Resolution Methods.” The second conference in the series will be held on February 22-23, 2010 at the Trea-sure Island Hotel and Casino in Las Vegas, NV. Additional conferences will be held in April, May, and June in New York, Dallas, and Washington, DC, respectively.

Miscellaneous

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Dewey & LeBoeuf’s Tax Controversy practice, led by partner Lawrence M. Hill (pictured above), is centered on large-case tax controversy exami-nations, tax litigation matters, and government investigations. Our lawyers represent taxpayers at the audit and appeals stages before the Internal Revenue Service, and our prominent team of nationally recognized trial lawyers litigates on behalf of taxpayers in the federal courts, from the U.S. Tax Court to the Supreme Court of the United States.

In addition, our tax controversy lawyers are active members of the American Bar Association Section of Taxation (“ABA Tax Section”) and the New York State Bar Association Tax Section (“NYSBA Tax Section”). Mr. Hill recently ended his term as Chairman of the ABA Tax Section’s Court Procedure and Practice Committee, and several of our lawyers are subcommittee chairs of the committee. Our lawyers are also active participants in ABA Tax Section and NYSBA Tax Section comment projects regarding new and proposed rules and tax policy matters. Most recently, our tax controversy lawyers assisted in drafting the ABA Tax Section comments regarding the proposed Tax Court rules and both the ABA Tax Section and the NYSBA Tax Section comments regarding revised section 6694, Tax Return

Preparer Penalties, and the proposed regulations thereunder.

Our tax controversy lawyers frequently participate in panels at tax law conferences and publish articles regarding significant tax controversy and litigation developments.

For more information about Dewey & LeBoeuf’s tax controversy practice, please contact Lawrence M. Hill at [email protected] or (212) 259-8330, Mark Allison at [email protected] or (212) 259-6866, or your Dewey & LeBoeuf relationship partner.

Dewey & LeBoeuf’s Tax Controversy Practice


26 |

December 2009

Lawrence M. Hill, Chair +1 212 259 8330 [email protected]

George R. Abramowitz +1 202 346 8090 [email protected]

Mark D. Allison +1 212 259 6866 [email protected]

Suzanne Jaffe Bloom +1 212 259 7362 [email protected]

Christine Chi +1 212 259 6864 [email protected]

Timothy J. Coleman +1 212 259 6660 +1 202 346 7977 [email protected]

John F. Collins +1 212 259 7080 [email protected]

Seth C. Farber +1 212 259 7227 [email protected]

Leo V. Gagion +1 212 259 7385 [email protected]

Felix B. Laughlin +1 202 346 7840 [email protected]

Jonathan W. Miller +1 212 259 7040 [email protected]

Abraham N.M. Shashy +1 202 346 7900 [email protected]

Tamara Ashford +1 202 346 8017 [email protected]

Richard A. Nessler +1 212 259 8356 [email protected]

David F. Owens + 1 212 259 6888 [email protected]

Benjamin Sokoly +1 212 259 6926 [email protected]

Jeffrey J. Amato +1 212 259 6379 [email protected]

Amy K. Anderson +1 212 259 8079 [email protected]

Jovanna V. Bello +1 202 346 7938 [email protected]

Molly M. Donovan +1 212 259 7394 [email protected]

Greg W. Featherman +1 202 346 7910 [email protected]

Graham Green +1 202 346 7930 [email protected]

Brittany L. Harrison +1 212 259 7187 [email protected]

Morgan W. Holtman +1 202 346 7912 [email protected]

Erica Howard-Potter +1 212 259 6252 [email protected]

William E. Kellogg +1 212 259 7341 [email protected]

Aaron C. Lang +1 212 259 6759 [email protected]

Kelly Librera +1 212 259 6451 [email protected]

Artyom Linnik +1 202 346 7879 [email protected]

Adam Lounsbury +1 212 259 7155 [email protected]

Eric C. Miller +1 212 259 8364 [email protected]

Alexandra Minkovich +1 212 259 7823 [email protected]

Matthew C. Oxman +1 212 259 6397 [email protected]

Rachel L. Partain +1 212 259 6358 [email protected]

Christina M. Petrella +1 212 259 7119 [email protected]

Dawn M. Rhea +1 213 621 6474 [email protected]

Staci Yablon +1 212 259 6363 [email protected]

Erin Ziaja +1 312 794 8022 [email protected]

Zhanna A. Ziering +1 212 259 6177 [email protected]

Members of Dewey & LeBoeuf’s Tax Controversy and Litigation Practice

To ensure compliance with the requirements of Treasury Depart-ment Circular 230, any tax advice contained in this newsletter is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penal-ties or (ii) promoting, marketing, or recommending to another party any matter(s) addressed herein.

This publication is intended only as a general discussion of these issues.

It is not considered to be legal advice. We would be pleased to provide additional details or advice about specific situations. For addi-tional information on this important topic, please feel free to call upon your Dewey & LeBoeuf relationship partner.

No part of this publication may be reproduced, in whole or in part, in any form, without our prior written consent.

© 2009 Dewey & LeBoeuf LLP

All rights reserved.

For further information on Dewey & LeBoeuf, please visit www.dl.com

8446 REV9 12‑24‑2009

Dewey & LeBoeuf’s Tax Controversy Practice

Dewey & LeBoeuf LLP | Tax Controversy and Litigation

About Dewey & LeBoeuf

Dewey & LeBoeuf is a full-service law firm providing

counsel throughout the Americas, Europe, Russia/CIS,

the Middle East, Asia and Africa. With more than 1,200

lawyers in major financial and commercial centers, the

firm represents national and global corporations, financial

institutions and government agencies in their most

complex legal matters.

For additional information, please visit www.dl.com.

| 3

A major part of Dewey & LeBoeuf LLP’s Tax practice involves large-case tax controversy examinations, tax litigation matters and government investigations. We represent US and overseas corporate taxpayers at the audit and appeals stages before the Internal Revenue Service (IRS) and in tax litigation in the federal courts, from the United States Tax Court to the Supreme Court of the United States.

Our tax controversy and litigation lawyers also advise our clients on corporate compliance and gover-nance matters. We assist clients in conducting internal investigations and develop appropriate internal policies and procedures for risk management purposes. We also represent clients in disciplinary actions brought by the Office of the Director of Practice of the U.S. Treasury and before state disciplinary boards.

In addition to representing clients in federal tax disputes, we have experi-ence representing clients in state tax disputes, particularly in New York and California and in tax-related arbitra-tions and mediations.

Internal Investigations and Corporate Governance

In a world where corporate practices and policies have captured the atten-tion of regulators, the courts and the general public, our clients look to us to help them develop and maintain good corporate governance poli-cies and procedures. In some cases, our clients have been the subject of significant government investiga-tions. Others have taken a proactive approach and asked us to determine the current state of their employees’ compliance with internal policies and procedures, and whether those policies and procedures provide adequate protection in an increas-ingly stringent environment. We have conducted full internal investigations for our clients, summarized our find-ings for government agencies and worked with our clients to develop new procedures to address govern-ment concerns and changes in regulatory requirements.

We have also worked with clients who are not subject to govern-ment investigations on adapting to a changing regulatory world. We have

reviewed our clients’ internal prac-tices for protecting and managing privileged communications; tax accrual work papers; FIN 48 work papers and disclosures; maintaining required information for tax shelters, and providing tax advice to third parties, among other items. We have assisted our clients in developing procedures to ensure that their employees do not inadvertently waive privilege, run afoul of the Code’s disclosure and list maintenance requirements or violate Circular 230. We often develop training modules and documentation procedures and policies for clients to use in keeping a record of their compliance with various regulatory obligations.

IRS Guidance

In situations where the appropriate tax treatment may be unclear, we have assisted our clients in seeking pre-closing guidance from the IRS through private letter rulings. During audits, we have also sought guidance for our clients and the audit team in the form of field service advice, chief counsel advice and technical advice memoranda.

Tax Controversy and Litigation


4 |

Audit

In response to the fact that IRS audit personnel now are relying more heavily on IRS counsel early in the audit process, we are more frequently being called upon to deal with IRS lawyers at the very early stages of an audit. A principal objective of the IRS in large corporate audits is to identify and prepare issues for litigation, particularly in fields where the IRS maintains a national industry specialist. When a client asks us to participate at the beginning of an audit, we attempt to shorten the examination process by focusing attention on significant issues and resolving issues that do not warrant litigation. Another benefit of this approach is that the IRS receives the message that the taxpayer is prepared to litigate the matter if necessary. A “trial attitude” often gives the IRS an incentive to settle on more favorable grounds.

We have recently represented our clients in audits regarding, among other issues, the proper tax treatment of international tax credit transac-tions, prepaid forward contracts and various financial products, poten-tial withholding tax liability in equity

derivatives transactions, methods of accounting, the proper application of the tests to determine permanent establishment and agency, the exis-tence of constructive partnerships, losses claimed as part of a section 351 transaction, debt/equity char-acterizations, transfer pricing issues, check-the-box liquidations and a international corporation’s eligibility for the portfolio interest exemption.

Appeals

If an issue cannot be resolved at the audit level, we will frequently recommend pursuing administrative remedies at the IRS Appeals Office. We assist our clients in evaluating which adjustments made by revenue agents should be protested to the Appeals Office. We are experienced in preparing written protests, inter-acting with Appeals officers and handling Appeals conferences. Quite often we have settled tax issues at this stage of the administrative proceedings.

Other pre-litigation activities include:

Preparation of administrative • settlement agreements, drafting refund claims and other documents

that may control the scope of later litigation;

Planning for the future selection of • a litigation forum, taking into account the nature of the issues and their historical treatment by the various courts;

Selecting reputable and effective • practitioners at the administrative level with a view to building the best possible record for litigation, should that prove necessary; and

Providing advice and representa-• tion in disputes over IRS document and information production demands, including challenges to and defenses against administrative summons enforcement.

Alternative Dispute Resolution and Civil Mediation and Arbitration

We have represented or advised our clients in many alternative dispute resolution processes, including participating in fast-track mediation, entering into pre-filing agreements, seeking early referral to Appeals, participating in Compliance Assur-ance Process (CAP), Accelerated Issue Resolution (AIR), Industry Issue Resolution (IIR) and the Mutu-ally Accelerated Appeals Process

Tax Controversy and Litigation (cont’d)

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(MAAP). Participating in alternative dispute resolution processes may allow our clients to resolve matters more quickly and less expensively than traditional dispute resolution methods.

In private plaintiff lawsuits, we have significant experience defending our clients in arbitrations before the American Arbitration Association, National Association of Securities Dealers, New York Stock Exchange and other arbitral bodies and, in civil mediations, as an alternative to seeking redress in court.

Litigation

Where the administrative appeals process does not result in a satis-factory resolution for our clients, we have a prominent team of nationally recognized trial lawyers and litigators who litigate tax matters in the federal courts, including the U.S. Tax Court, the U.S. Court of Federal Claims, the federal district courts, state courts, courts of appeals and the U.S. Supreme Court.

Tax Shelter Litigation

Dewey & LeBoeuf’s experience in tax shelter litigation is extensive. Our tax controversy lawyers have represented many of the world’s largest financial institutions, international accounting firms, prominent law firms and an investment advisory firm in ongoing IRS tax shelter promoter penalty investigations, related government investigations and approximately 1,000 civil litigations.

We have also represented multina-tionals in cases involving virtually every listed transaction, as well as in Corporate-Owned Life Insurance (COLI), Bank-Owned Life Insurance (BOLI), Lease-In Lease-Out (LILO) and structured tax transaction cases. Our civil litigation work includes serving as national litigation counsel to a major investment banking firm in numerous cases brought in federal district courts across the country, as well as arbitrations by plaintiffs who invested in allegedly abusive tax shelters. In addition, we have repre-sented many of these clients, as well as prominent individuals, in multiple investigations conducted by the

United States Senate involving tax shelters, offshore tax havens, hedge funds and FIN 48 issues.

We have defended a number of clients in high profile summons enforcement actions in the federal courts, involving third-party record-keeper, dual purpose and John Doe summonses, including the successful defense of an interna-tional accounting firm in a summons enforcement action filed in federal district court by the Department of Justice seeking documents where the court held that all documents at issue were protected by the attorney-client privilege, the federally authorized tax practitioner privilege and the work product doctrine.

Transfer Pricing Matters

Dewey & LeBoeuf has been involved in major transfer pricing litigation, including representing a major oil company in one of the largest transfer pricing cases in US history. In addition, we are regularly consulted to work with taxpayers and experts to develop appropriate methodolo-gies under Section 482 in anticipation of audits and litigation.


6 |

White Collar Tax Investigations

We have represented clients in “bet the company” criminal tax investiga-tions, litigations and other related government inquiries, including representing a major international financial institution in the largest criminal tax investigation in US history. In addition to advising clients in criminal tax investigations, we have advised clients in U.S. Senate, Government Accountability Office, Grand Jury, Independent Counsel, Office of Professional Responsibility of the Treasury and state board of accountancy investigations. We have represented clients who have been targets, subjects and witnesses in such investigations.

Insurance Tax Matters

We have extensive experience in insurance tax matters, and routinely handle tax controversy matters from audit through litigation for our insur-ance clients. In 1995, we successfully litigated the landmark case Taisei Fire and Marine Ins. Co., Ltd., v. Commis-sioner, 104 T.C. 535 (1995), which established the parameters of the

independent agent exception to the creation of a permanent establish-ment under tax treaties. We took a case all the way to the Supreme Court involving the proper determi-nation of a transitional rule created by the 1986 legislative changes to the taxation of non-life insurance companies. We have also litigated Subchapter L cases and other cases involving captive insurance and tax accounting issues for our clients.

Tier I Issues

Recently, the IRS has designated approximately 45 issues as “Tier I issues,” resolution of which must be consistent in all cases involving similarly-situated taxpayers. As a result, cases involving Tier I issues are reviewed on a national level to ensure consistent application of rules and taxpayer treatment. Our tax controversy lawyers have experi-ence representing clients in disputes involving Tier I issues, including the appropriate treatment of international tax credit-generating transac-tions, deductibility of government settlements and virtually all listed transactions (see also Tax Shelter Matters above).

Tax Controversy and Litigation (cont’d)

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Financial Products Matters

Dewey & LeBoeuf has a long history of representing clients in litigation regarding the proper tax treatment of various financial products. We successfully tried two landmark cases involving a Government Sponsored Entity (GSE) that is one of the largest players in the secondary mortgage market. In one case we handled, involving hedging transac-tions, the U.S. Supreme Court held that the GSE’s counterparty real-ized tax-deductible losses when it exchanged participation interests in mortgage loans with the GSE in order to hedge its risk exposure on the underlying mortgages. We also repre-sented the GSE in a case ultimately decided by the DC Circuit involving the deductibility of losses arising from mortgage swap transactions.

We have represented many of the world’s largest financial institutions and multinationals in cases involving cross-border tax arbitrage transac-

tions, Foreign Tax Credits (FTCs), total return swaps, prepaid forwards, Repos, Real Estate Mortgage Invest-ment Conduits (REMICs), Real Estate Investment Trusts (REITs), and a multiplicity of financial product and derivatives strategies.

Pro Bono Tax Controversy

In addition to the tax controversy work described above, we regularly take on pro bono tax controversy matters. We have assisted clients in collection cases, submitted Offers in Compromise for clients who can afford to pay some, but not all, of their tax liability, and have repre-sented clients in a variety of other matters. As a former sponsor of the Low-Income Taxpayer Clinic at Duke University Law School, we took on several new matters each semester. We recently partnered with New York University School of Law to form a Tax Clinic for students beginning in the spring semester of 2010.

Contact partner

Lawrence M. Hill New York Partner [email protected] +1 212 259 8330


Worldwide Offices

New York1301 Avenue of the AmericasNew York, NY 10019-6092tel +1 212 259 8000fax +1 212 259 6333

125 West 55th StreetNew York, NY 10019-5389tel +1 212 424 8000fax +1 212 424 8500

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Parismultinational partnership

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Riyadh Khalid A. Al-Thebity Law Firmaffiliated office

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06-30-2009

New York1301 Avenue of the AmericasNew York, NY 10019-6092tel +1 212 259 8000fax +1 212 259 6333

125 West 55th StreetNew York, NY 10019-5389tel +1 212 424 8000fax +1 212 424 8500

Londonmultinationale partnerschaft No. 1 Minster CourtMincing LaneLondon EC3R 7YLtel + 44 20 7459 5000fax + 44 20 7459 5099

Washington, DC 1101 New York Avenue, NWWashington, DC 20005-4213tel +1 202 346 8000fax +1 202 346 8102

Albany99 Washington AvenueSuite 2020Albany, NY 12210-2820tel +1 518 626 9000fax +1 518 626 9010

AlmatyKen Dala Business Center5th FloorProspekt Dostyk, 38Almaty 050010tel + 7 727 250 7575fax + 7 727 250 7576

Boston260 Franklin StreetBoston, MA 02110-3173tel +1 617 748 6800fax +1 617 439 0341

BrüsselArts/Lux BuildingRue du Luxemburgstraat 14AB-1000 Brüsseltel + 32 2 227 0900fax + 32 2 227 0909

ChicagoTwo Prudential Plaza180 North Stetson AvenueSuite 3700Chicago, IL 60601-6710tel +1 312 794 8000fax +1 312 794 8100

Doha Qatar Financial Centre BranchAl Fardan Office Tower8th Floor61 Al Funduq StreetP.O. Box 31316Dohatel +974 410 1717fax +974 410 1500

DubaiSuites 102-104, Level 1The Gate Village Building 4Dubai International Financial CentreP.O. Box 506675Dubaitel +971 4 425 6300fax +971 4 425 6301

FrankfurtSkyperTaunusanlage 160329 Frankfurt tel + 49 69 3639 30fax + 49 69 3639 3333

HongkongCitibank Plaza2008, ICBC TowerNo. 3 Garden RoadCentral, Hongkongtel + 852 3697 7000fax + 852 3697 7099

HoustonRRI Energy Plaza1000 Main StreetSuite 2550Houston, TX 77002tel +1 713 287 2000fax +1 713 287 2100

Johannesburg 11th floor, The Forum Building2 Maude StreetP.O. Box 781033Sandton, Johannesburg2196tel + 27 11 911 4300fax + 27 11 784 2855

Los Angeles333 South Grand AvenueSuite 2600Los Angeles, CA 90071-1530tel +1 213 621 6000fax +1 213 621 6100

MadridCalle de Velázquez, 5728001 Madridtel + 34 91 781 55 00fax + 34 91 577 90 48

MailandVia F.lli Gabba 420121 Mailandtel + 39 02 3030 9330fax + 39 02 3030 9340

MoskauNikitsky Pereulok 5125009 Moskautel + 7 495 737 5000fax + 7 495 737 5050

Parismultinationale partnerschaft

51, rue Pierre Charron75008 Paristel + 33 1 53 93 77 00fax + 33 1 42 56 08 06

PekingBeijing Kerry CenterSouth TowerSuite 1429No. 1 Guanghua RoadPeking 100020tel + 86 10 6583 9500fax + 86 10 6583 9600

Riad Khalid A. Al-Thebity Law Firmassoziertes büro

King Fahad RoadSky Towers - 8th FloorP.O. Box 300807Riad 11372tel + 966 1 416 9990fax + 966 1 416 9980

RomVia Giovanni Battista De Rossi, 3000161 Romtel + 39 06 4520 6220fax + 39 06 4520 6230

San FranciscoOne Embarcadero CenterSuite 400San Francisco, CA 94111-3619tel +1 415 951 1100fax +1 415 951 1180

Silicon Valley1950 University AvenueSuite 500East Palo Alto, CA 94303-2225tel +1 650 845 7000fax +1 650 845 7333

Warschau Stock Exchange Buildingul. Ksiazeca 400-498 Warschautel + 48 22 690 6100fax + 48 22 690 6222

06-30-2009 7796 REV5 10-28-2009

dl.com

Lawrence M. Hill

New York+1 212 259 8330

[email protected]

Fax:+1 212 259 6333

Practice AreasTaxLitigationTax Controversy and LitigationSecurities, M&A and CorporateGovernance LitigationWhite Collar Criminal Defense andInvestigations

Lawrence M. HillPartner

Larry Hill is the Chair of Dewey & LeBoeuf's Tax Controversy andLitigation Group and is also a member of the firm's ExecutiveCommittee and Leadership Committee. The New York Times callsMr. Hill "a leading member of the American tax bar." The Legal500 writes that Mr. Hill "stands out as one of the country's pre-eminent advisors in tax controversy, procedure andadministration" and Chambers USA reports that Mr. Hill is"winning acclaim from all corners. He is prominent in majorcontroversy matters, with a focus on litigation, IRS controversyand white collar investigations. He is also appreciated for his skillsin significant financial product tax disputes."

Mr. Hill was formerly a Trial Attorney and National Tax ShelterProject Attorney with the Office of Chief Counsel, InternalRevenue Service and a Special Assistant United States Attorneywith the United States Attorney's Office in Washington, DC. Hewas twice awarded Special Achievement Awards from the IRS forbeing one of the top trial attorneys in the country. He also servedas Assistant General Counsel to a "Big Four" accounting firm.

Mr. Hill is lead national litigation counsel to a major internationalbank in civil litigation and government investigations involvingalleged tax shelters, including the largest criminal tax investigationin US history. He is also lead counsel to a number of majorprofessional services firms and financial institutions who areunder promoter penalty investigation by the Internal RevenueService, and has represented clients in tax shelter investigationsconducted by the U.S. Senate Finance Committee and the SenatePermanent Subcommittee on Investigations (PSI). He has alsorepresented financial institutions in PSI investigations involvingoffshore tax havens, FIN 48 and tax accrual work paper issuesand offshore hedge funds.

Mr. Hill additionally represents roughly a dozen of the world'slargest financial institutions in other litigation, risk management,compliance, tax consulting and internal investigations.

Mr. Hill also represents clients in cases involving complexfinancial structures and products such as Foreign Tax Credits,Total Return Swaps and other Tier I issues; Prepaid Forwards,REMIC Residuals, RIC Strips, Contingent Liabilities, LILOs,SILOs, and various derivative strategies and listed transactions.

Mr. Hill has been selected as one of the "Top 100 Most InfluentialPeople in the Accounting Profession" (Accounting TodayMagazine, 1998, 1999 and 2000). He has represented many of

Dewey & LeBoeuf LLP | dl.com For a complete list of the firm's affiliates go to: http://dl.com/utility/LegalNotices.aspx#affiliates_list

the Big Four and international accounting firms in litigation mattersand has counseled them on ethical, procedural and riskmanagement issues. He has also represented clients in SECinvestigations involving issues such as auditor independence.

Based on confidential peer reviews by practicing lawyers andjudges unaffiliated with Dewey & LeBoeuf, Martindale-Hubbell®has assigned Mr. Hill its highest ratings categories for both ethicsand legal abilities in his practice areas. Mr. Hill has been namedone of The Best Lawyers in America and has been selected as aFellow of the American Bar Foundation, a New York SuperLawyer; and is listed in The Super Lawyers, Corporate CounselEdition, featuring business litigators from across the country; andin the Chambers USA Guide – America's Leading BusinessLawyers, The Legal 500, Litigation – Guide to the LeadingLawyers in the United States, The Lawdragon Guide to TheNation's Leading Legal Minds and Lawdragon 3000 LeadingLawyers in America.

Selected Activities

▪ ABA Section of Taxation Appointments to the UnitedStates Tax Court Committee

▪ Retiring Chair of the Court Procedure and PracticeCommittee of the Tax Section of the American BarAssociation

▪ Fellow, American Bar Foundation▪ Chair of the Tax Section of the American Bar Association's

Circular 230 Working Group▪ Chair of the Subcommittee on Tax Shelters of the

Administrative Practice Committee of the Tax Section ofthe American Bar Association

▪ Subcommittee Chair of the Standards of Tax PracticeCommittee of the Tax Section of the American BarAssociation

▪ Member, American Bar Association Advisory Panel▪ Member, New York State Bar Association Task Forces on

Circular 230 and the return preparer penalty▪ Member, Wall Street Tax Association▪ Editor, Focus on Tax Controversy and Litigation

Newsletter▪ Member, Advisory Board of the Journal of Tax Practice &

Procedure▪ Member, Advisory Board of CCH Tax Shelter Alert▪ Board Member of CCH Corporate Business Taxation

Monthly▪ Member, Editorial Board of Tax-Arbitration.com▪ Member, Advisory Board of Practical U.S./Domestic Tax

Strategies▪ Member, Board of Directors of the European-American

Chamber of Commerce▪ Member, Executive Committee of ADL NY Lawyers'

Division

Publications and Speeches

▪ Client CLE Conference, Fifth Annual Year-End TaxConference and Celebration, "Tax Controversy andLitigation" (December 3, 2009, New York, NY).

▪ Wall Street Tax Association Tax Seminar, "Current Issuesin Tax Audits" (November 17, 2009, New York, NY).

▪ 25th Annual LICONY Tax Conference, "Attorney Work-Product Doctrine: Recent Developments in the Context of


Tax Accrual Workpapers" (November 12, 2009, New York,NY).

▪ 2009 European Structured Financial Products Summit,"Dealing with the Revenue Authorities and Audits of Cross-Border Financial Products Controversies" (November 3-4,2009, Paris, France)

▪ UCLA Extension 2009 Annual Tax Controversy Institute,"Representation Techniques: From Examination to TaxCourt Litigation" (October 27, 2009, Beverly Hills, CA).

▪ Strafford Teleconference, "U.S. v. Textron: Implications forCorporate Taxpayers – Strategies for ProtectingConfidentiality of Tax Accrual Work Papers" (September24, 2009).

▪ Institute of International Bankers, 2009 Annual TaxSeminar on U.S. Taxation of International Banks,"International Enforcement Issues Relating to U.S. TaxInformation Reporting and Withholding, QualifiedIntermediary (QI) Agreements, FBAR Filings" (June 18,2009, New York, NY).

▪ New York University, School of Continuing andProfessional Studies, First Annual Tax Controversy Forum,"Responding to IRS Requests for Information: Strategiesand Tips for Managing an Audit" (June 12, 2009, NewYork, NY).

▪ Taxation of European & U.S. Cross-Border FinancialProducts Conference, "Regulatory DevelopmentsRegarding Tax Advantaged Financial Products" (June 10,2009, London, England).

▪ ABA Section of Taxation May Meeting, Court Procedureand Practice Committee, "From Madoff-Stanford:Representing Victims of Investor Fraud" (May 8, 2009,Washington, DC).

▪ Co-author, "Switzerland and UBS Resist IRS Effort toForce Disclosure of Bank Account Holder Information,"Practical European Tax Strategies (April 2009).

▪ AICPA Telephone Seminar, "Practical Aspects ofProviding Tax Advice to Madoff Victims" (March 11, 2009).

▪ ALI-ABA Telephone Seminar/Audio Webcast, "AdvisingInvestment Fraud Victims: Tax, Securities, and BankruptcyIssues" (February 24, 2009).

▪ Client CLE Seminar/Audio Webcast, "Textron: Victory orAcademic Result" (February 6, 2009, New York, NY).

▪ ABA Section of Taxation Midyear Meeting, CourtProcedure and Practice Committee, "Effective Preparation& Use of Fact Witnesses at Trial" (January 9, 2009, NewOrleans, LA).

▪ Client CLE Conference, Fourth Annual Year-End TaxConference and Celebration, "Tax Controversy andLitigation" (December 4, 2008, New York, NY).

▪ Tax Executives Institute, New York Chapter FederalCommittee Meeting, "The Corporate Tax LegislativeOutlook Under the Obama Administration" (November 20,2008, New York, NY).

▪ Wall Street Tax Association Tax Seminar, "TaxControversies" (November 17, 2008, New York, NY).

▪ 24th Annual LICONY Tax Conference, "EthicalConsiderations for Tax Practitioners" (November 13, 2008,New York, NY).

▪ 2008 European Structured Financial Products Summit,"Update on Recent U.S. Litigation as Related to FinancialProducts with Specific Reference to Business Purpose/Economic Substance" (October 28-29, 2008, Paris,France).

▪ "The Increasingly Vital Role of International Tax Law,"International Tax Law Best Practices, Inside the Mindsseries, Aspatore (2008).

▪ ABA Section of Taxation, Court Procedure CommitteeMeeting, "The Use of Jury Trials in Civil Tax Cases"(September 2008, San Francisco, CA).


▪ Co-author, "IRS Disallows Foreign Tax Credits Claimed forCross-Border Trust," Practical U.S./International TaxStrategies (July 31, 2008).

▪ Co-author, "IRS Issues Regulations on 'Killer B'Reorganizations Involving Foreign Corporations," PracticalU.S./International Tax Strategies (June 30, 2008).

▪ Client CLE Conference, "International Tax Investigationsand Litigation, To Be or Not to Be: Surviving or AltogetherAvoiding a Transatlantic Corporate Fraud Crisis" (June 26,2008, New York, NY).

▪ International Institute of Bankers Annual Tax Seminar,"Interplay of Developments in the § 6694 Tax PreparerRules and Circular 230" (June 24, 2008, New York, NY).

▪ Client CLE Conference, Third Annual Year-End TaxConference and Celebration, "FAS 109: Accounting forUncertain Tax Positions," "Sarbanes-Oxley, Circular 230and Other Tax Practice Developments" and "TaxControversy Developments," (December 5, 2007, NewYork, NY).

▪ ABA Section of Taxation May Meeting, Court Procedureand Practice Committee, "FIN 48: Impact on Litigation andSettlements" (May 11, 2007, Washington, DC).

▪ Co-author, "What Tax-Exempt Entities Must Know to AvoidCostly Excise Taxes," Tax Notes (May 7, 2007).

▪ United States Tax Court Judicial Conference, "TryingCases in the Electronic Age" (April 19, 2007, Williamsburg,VA).

▪ Co-author, "Tax Policy Gone Wild: Harsh Penalties asRevenue Raisers," Tax Notes Today (April 2, 2007).

▪ Client CLE Conference, Second Annual Year-End TaxConference and Celebration, "FAS 109 and FIN 48:Accounting for Uncertain Income Tax Positions" and "TaxControversy and Litigation Developments" (December 6,2006, New York, NY).

▪ "Let the Sunshine In? Transparency has its Limits,"Journal of Tax Practice & Procedure (October-November2006).

▪ National Constitution Center Audio Conference, "2006 TaxShelter Update: Status of IRS Disclosure and PenaltyRules" (November 2, 2006).

▪ Client CLE Conference, "Trends and Challenges inComplex Litigation, White Collar Crime and GovernmentInvestigations" (November 1, 2006, New York, NY).

▪ 2006 European Structured Financial Products Summit,"U.S. Tax Shelter Promoter Audits and LitigationDevelopments" (October 24-25, 2006, Paris, France).

▪ UCLA Extension 2006 Annual Tax Controversy Institute,"Tax Enforcement: Priorities, Strategies and theAdministrative Process" (October 23, 2006, Beverly Hills,CA).

▪ ABA Section of Taxation and Section of Real Property,Probate and Trust Law, Joint Fall CLE Meeting,"Treatment of Testifying and Non-Testifying Experts"(October 20, 2006, Denver, CO).

▪ "The Economic Substance Doctrine," Tax Business(September/October 2006).

▪ ABA Section of Taxation, Court Procedure and PracticeCommittee, "Litigation of Promoter Penalties" (May 2006,Washington, DC).

▪ Client CLE Conference, First Annual Year-End TaxConference and Celebration, "FAS 109: Accounting forUncertain Tax Positions," "Sarbanes-Oxley, Circular 230and Other Tax Developments" and "Tax ControversyDevelopments" (December 8, 2005, New York, NY).

▪ The Structured Finance Institute, 2005 EuropeanStructured Financial Products Summit, "WashingtonUpdate and U.S. Tax & Regulatory Developments"(October 25, 2005, Paris, France).


▪ The Structured Finance Institute, 2005 Structured AssetFinance and Leasing Conference, "U.S. Outbound andInbound Cross-border Leasing Developments and theWashington Update" (October 26, 2005, Paris, France).

▪ ABA Section of Taxation, Court Procedure and PracticeCommittee, "The New Policy on Tax Accrual Workpapers:Transparency or Transgression?" (September 16, 2005,San Francisco, CA).

▪ Committee of Banking Institutions on Taxation, "TheApplication of the New Circular 230 Rules to BankingInstitutions" (June 21, 2005, New York, NY).

▪ Client CLE Conference, "The Roles and Responsibilities ofIn-House and Outside Counsel in Coordinating MultipleGovernment Investigations and Related Civil Litigations"(June 8, 2005, New York, NY).

▪ ABA Section of Taxation, Standards of Tax PracticeCommittee, "New Circular 230 Written Opinion and AdviceRegulations" (May 21, 2005, Washington, DC).

▪ ABA Section of Taxation, Court Procedure and PracticeCommittee, "The Pitfalls and Pratfalls of ElectronicDiscovery" (May 20, 2005, Washington, DC).

▪ ABA Section of Taxation, Tax Shelter Task Force, "Reporton the ABA's Circular 230 Comments" (May 20, 2005,Washington, DC).

▪ The Association of the Bar of the City of New York,"Providing Information to the IRS: Taxpayer Rights andObligations" (May 16, 2005).

▪ Principal Responsibility for drafting the "ABA Commentson the Final Circular 230 Regulations" (May 11, 2005).

▪ The Federal Bar Association, The 29th Annual TaxConference, "Developments to Watch For on Privilege"(March 17, 2005, Washington, DC).

▪ ABA Section of Taxation, Court Procedure and PracticeCommittee, "How Much Judicial Deference is Due theAdministrative Determinations of the IRS?" (January 21,2005, San Diego, CA).

▪ ABA Section of Taxation, Court Procedure and PracticeCommittee, "Preclusion of Expert Witnesses" (October 1,2004, Boston, MA).

▪ The Association of the Bar of the City of New York, "TaxControversies: Negotiating and Resolving Disputes withthe IRS" (April 29, 2004, New York, New York).

▪ The Federal Bar Association, 28th Annual TaxConference, "Expert Witness or Advocate: How to Drawthe Line" (March 26, 2004, Washington, DC).

▪ Client CLE Conference, "A Roadmap to the IRS's NewEnforcement Initiatives" (November 13, 2003, London,England).

▪ Client CLE Conference, "Hot Topics in IRS Practice,Procedure and Tax Litigation" (September 19, 2003, NewYork, NY).

▪ ABA Section of Taxation, Standards of Tax PracticeCommittee, "What Remains of Section 7525?" (September13, 2003, Chicago, IL).

▪ ABA Section of Taxation, Tax Shelter Task Force,"Privilege Issues in Tax Shelter Cases" (September 12,2003, Chicago, IL).

▪ ABA Section of Taxation, Court Procedure and PracticeCommittee, "Litigating Accuracy-Related Penalties"(September 12, 2003, Chicago, IL).

▪ BNA National Tax Conference, "The Post-Shelter Era:Resolving Disputes and Following the New Rules" (August6, 2003, Washington, DC).

▪ "The Advent of Cost-Shifting Arrangements in ElectronicDiscovery Disputes," Journal of Tax Practice andProcedure (June-July 2003).

▪ Tax Executives Institute, New York Chapter AnnualMeeting, "Tax Department Risk Management and Ethical


Considerations in the Post-Enron Environment"(December 18, 2002, New York, NY).

▪ Insurance Tax Conference, "Tax Shelters" (November 7,2002, Chicago, IL).

▪ Institute of International Bankers, Annual Seminar on theU.S. Taxation of International Banks, "Ethics & ExposureRoundtable" (June 19, 2002, New York, NY).

▪ Tax Executives Institute, New England Regional Meeting,"The Appeals Process in the Large and Mid-SizedBusiness Division of the IRS" (February 15, 2002, Boston,MA).

▪ Tax Executives Institute, "The Rite Aid Case: APrescription for Corporate Taxpayers?" (January 10, 2002,New York, NY).

▪ "Counterpoint: The Proposed Revisions to Circular 230Are Flawed," ABA Section of Taxation Newsletter (Winter2002).

▪ "New Fast Track Dispute Resolution Pilot Programs OfferOpportunities for Taxpayers to Resolve Disputes at ExamsMore Efficiently," Journal of Tax Practice & Procedure(December 2001/January 2002).

▪ 36th Annual Bank Tax Institute, "Bank-Owned LifeInsurance in Today's Environment" (December 13-14,2001, Orlando, FL).

▪ ABA Section of Taxation Annual Meeting, AdministrativePractice Committee, "Circular 230 Debate" (August 3,2001, Chicago, IL).

▪ ABA Section of Taxation May Meeting, Court Procedureand Practice Section, "A Demonstration and Discussion ofHyper-text Briefs" (May 11, 2001, Washington, DC).

▪ Testimony before the Internal Revenue Service regardingthe Proposed Amendments to Circular 230 (May 2, 2001,Washington, DC).

▪ ABA Section of Taxation Midyear Meeting, Standards ofTax Practice Committee, "MDPs and Lawyers' Ethics"(January 13, 2001, Scottsdale, AZ).

▪ ABA Section of Taxation Midyear Meeting, CourtProcedure and Practice Committee, "Using VideotapedDepositions - A Demonstration and Critique" (January 12,2001, Scottsdale, AZ).

▪ Tax Executives Institute, "IRS Practice Procedure: What'sHot, What's New" (November 16, 2000, Rye, NY).

▪ Tax Executives Institute, "International Penalty Issues"(November 15, 2000, New York, NY).

▪ Tax Executives Institute, "Tax Shelter Controversies –Developments and Strategies for Exams and Beyond"(October 18, 2000, New York, NY).

▪ "Greetings From the Corporate Tax Shelter Front," Journalof Tax Practice & Procedure (June-July 2000).

▪ Tax Executives Institute, "Litigating COLI Cases AfterWinn-Dixie" (May 19, 2000, Morristown, NJ).

▪ ABA Section of Taxation May Meeting, Court Procedureand Practice Committee, "Witness Preparation - The Dosand Don'ts" (May 12, 2000, Washington, DC).

▪ ABA Section of Taxation May Meeting, AdministrativePractice Committee, "The Tax Audit Process UnderModernization" (May 12, 2000, Washington, DC).

▪ ABA Section of Taxation Midyear Meeting, Standards ofTax Practice Committee, "How Will the Restatement of theLaw Governing Lawyers Affect Tax Practice?" (January22, 2000, San Diego, CA).

▪ "New Strategies for Litigating Corporate Tax ShelterCases," Journal of Tax Practice & Procedure (December1999-January 2000).

▪ "Recent Amendments to the Tax Court's Rules of Practiceand Procedure: A Response to the Court's ExpandedJurisdiction" (with I.J. Sang), Journal of Tax Practice &Procedure (August-September 1999).


▪ "Frederick Revisited," Journal of Tax Practice & Procedure(August-September 1999).

▪ "The Waxing and Waning of Privilege in the Federal TaxContext," Journal of Tax Practice & Procedure (June-July1999).

▪ "The New Burden of Proof in the Federal Tax Courts,"Journal of Tax Practice & Procedure (April-May 1999).

▪ National Teleconference, Equipment Leasing Association,"Strategies for Successfully Defending a Cross-BorderLeasing Audit After Revenue Ruling 99-14" (May 24,1999).

▪ United States Tax Court 1999 Judicial Conference,"Privileges: What's New? What's Left?" (April 9, 1999,Williamsburg, VA).

▪ ABA Tort and Insurance Practice Section, NationalMeeting, "Accountants' Liability: Charting New Frontiers inthe New Millennium" (March 18, 1999, New York, NY).

▪ Tax Executives Institute, "Corporate Tax Shelters – AnExplanation of What They Are, IRS Initiatives andLegislative Prospects" (March 16, 1999, New York, NY).

▪ Testimony Before the ABA Commission on"Multidisciplinary Practice" (February 5, 1999, LosAngeles, CA).

▪ ABA Section of Taxation Midyear Meeting, "The NewBurden of Proof" (January 15, 1999, Orlando, FL).

EducationGeorge Washington University Law School, 1989, LL.M.(Taxation)George Washington University Law School, 1984, J.D.State University of New York, Binghamton, 1981, B.A., Phi BetaKappa, highest honors

Bar AdmissionsNew York

Bar AdmissionsU.S. Court of Appeals, 2nd CircuitU.S. Court of Appeals, 3rd CircuitU.S. Court of Appeals, 5th CircuitU.S. Court of Appeals, 6th CircuitU.S. Court of Appeals, 7th CircuitU.S. Court of Appeals, 9th CircuitU.S. Court of Federal ClaimsU.S. District Court, Eastern District of New YorkU.S. District Court, Southern District of New YorkU.S. District Court, Northern District of IllinoisU.S. Tax Court


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