The US government has vigorously litigated various sophisticated tax planning approaches developed by outside advisors and suggested as strategies for corporations and wealthy individuals to follow. The Internal Revenue Service has identified a number of them as “listed transactions” that it contends are abusive tax shelters. Other parties defend them as legitimate tax planning within the law as it stands or stood at the time.

Various economic questions bear on the resolution of these disputes. For example, did economically rational non-tax business purposes justify the transactions? Did the transactions have “economic substance” apart from the tax consequences? What is the economic basis of the deduction? Did the transaction or series of transactions offer a reasonable possibility of profit, apart from the tax consequences? Sometimes it can be hard to tell what occurred in the transaction and how the various transaction features relate to the ultimate tax deduction.

As one example, The Brattle Group was retained to analyze a set of transactions associated with the hedging and securitization of a mortgage portfolio. The taxing authority alleged that the transaction had no business purpose or economic substance. Our work involved identifying and providing support to three academic experts in analyzing the financing and structuring of the transactions. We also provided litigation support to counsel.

A sample of the types of engagements The Brattle Group has worked on includes presenting testimony in disputes regarding LiLo and SiLo transactions, COLI transactions, BLIPS transactions, Son of Boss transactions, DAD and DAT transactions, and CARDS transactions.