Tax Notes Quotes Mark Allison on Supreme Court Tax Shelter Case

Mark D. Allison spoke with Tax Notes concerning the Supreme Court's unanimous decision on December 3 in United States v. Woods to uphold the 40% gross valuation misstatement penalty, which applies to a partner's overstated outside basis when a partnership is disallowed as a sham.  To view the full article, please visit Tax Notes' website (subscription required).

Excerpt taken from the article "Supreme Court Holds Valuation Misstatement Penalty Applies in Tax Shelter Case" by Andrew Velarde for Tax Notes.

Mark D. Allison of Caplin & Drysdale was not surprised by the decision, although he did take issue with the Court's language in its opinion.

The Court's "dismissiveness of the taxpayer's arguments does not readily reflect the difficulty of the issues," Allison told Tax Analysts. "The Court's upholding of jurisdiction of penalties in a partnership-level proceeding sets up potential confusion as to when and how to introduce evidence to defend against those penalties, and to what extent principles of res judicata and collateral estoppel could adversely impact defenses in subsequent partner-level proceedings," he said.

Allison likewise noted the Court's dismissal of blue book commentary, expressing disappointment in its decision. "The Court's rejection of the blue book as a means of interpreting the application of the valuation misstatement penalty where multiple legal grounds for a determination exists is ultimately unsatisfying, given how much of the debate in the lower courts had centered around the blue book's language," Allison said.