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Case Highlights

DAD Transaction

Brattle secures favorable ruling for the United States government in dispute over a distressed asset/debt transaction.



The United States Tax Court recently ruled in favor of the government that transactions entered into separately by various partnership entities (Buyuk LLC et. al. and Beyazit LLC et. al.) lacked economic substance, and denied the taxpayers involved their claims. The deals in question, commonly known as a distressed asset/debt (“DAD”) transaction, involved the sale of Russian receivables, with a high claimed tax basis but whose market value was transformed by economic upheaval in Russia.

Brattle’s Role

On behalf of the government, Brattle principal Michael Cragg analyzed whether a rational investor would have entered into the transaction were it not for the claimed tax benefits. He analyzed the economic environments and the incentives of the various parties involved in the transactions.

The Brattle team included principals Michael Cragg and Evan Cohen; associate Jehan deFonseka; and research analysts Ryan Leech, Minal Shankar, and Kyle Spies.


Judge Laro stated in his opinion: “We agree with Dr. Cragg’s conclusion that there was no realistic possibility for the transactions at issue to break even absent any tax benefits.” This is one of the first tax cases that used the technique of “expert hot tubbing.”