Tax Court Rejects Buy.com Founder's $45 Million OPIS Tax Shelter • TaxProf Blog

Blum v. Commissioner, T.C. Memo. 2012-16 (Jan. 17, 2012):

This Court has not previously considered an Offshore Portfolio Investment Strategy (OPIS) transaction. The question before us is whether petitioners are entitled to deduct certain capital losses claimed from their participation in the OPIS transaction. We hold that they are not because the transaction lacks economic substance. We must also decide whether petitioners are liable for gross valuation misstatement penalties and negligence penalties under § 6662(a). We hold they are liable for the penalties.

Petitioners claimed an artificial loss of over $45 million. This is exactly the type of “too good to be true” transaction that should cause a savvy, experienced businessman to seek independent advice. See Neonatology Associates, P.A. v. Commissioner, 299 F.3d at 234 (“When, as here, a taxpayer is presented with what would appear to be a fabulous opportunity to avoid tax obligations, he should recognize that he proceeds at his own peril.”). … Petitioners’ decision to rely exclusively on KPMG in structuring, facilitating and reporting their OPIS transaction was therefore not reasonable. Petitioners did not take their position in good faith and thus lacked reasonable cause for that position. Accordingly, we sustain respondent’s determination that petitioners are liable for accuracy-related penalties for 1998 and 1999.

About the Author

Paul Caron

Paul Caron was named Duane and Kelly Roberts Dean of Pepperdine University School of Law on June 1, 2017. Dean Caron joined the Pepperdine faculty in 2013 after serving as the Dorothy and Leonard Straus Distinguished Visiting Professor of Law in the spring semesters of 2010 through 2013. He served as Associate Dean for Research and Faculty Development at Pepperdine in 2015-2017. Before coming to Pepperdine, he was Associate Dean of Faculty and Charles Hartsock Professor of Law at the University of Cincinnati College of Law.

3 responses to “Tax Court Rejects Buy.com Founder’s $45 Million OPIS Tax Shelter”