Skip to Main Content
March 30, 2011
Brattle Principal Provides Testimony on the Economic Substance and Business Purpose for a CARDS Transaction in Mark and Lucy Kerman v. Commissioner of Internal Revenue

Dr. Lawrence Kolbe, a principal in The Brattle Group’s Cambridge, MA office, provided testimony on behalf of the U.S. Internal Revenue Service that helped shape the outcome of a Custom Adjustable Rate Debt Structure (CARDS) dispute in U.S. Tax Court in Louisville, KY. On Tuesday, March 8, 2011, Judge Joseph Robert Goeke ruled in favor of the U.S. Government and concluded that the CARDS transaction lacked economic substance and stood no chance of earning a profit, and that the taxpayers did not have a nontax business purpose for entering into the CARDS transaction. The opinion adopted key conclusions from the testimony provided by Brattle’s expert. In the trial, Dr. Kolbe testified regarding the CARDS transaction structure and the financial underpinnings of the transaction, explained how to evaluate the economics of the transaction, and opined on the objective profitability of the transaction and the economic rationality of entering into the CARDS transaction versus standard financing.