U.S. Appeals Court Upholds Transferee Liability for Abusive Tax Shelter Transactions

The U.S. Court of Appeals for the Federal Circuit affirmed decisions of the Court of Federal Claims holding several family trusts liable as transferees for unpaid federal income taxes, penalties, and interest arising from abusive tax shelter transactions involving Son-of-BOSS strategies. The trusts owned stock in two C corporations holding approximately $76 million in unrealized gains. They sold the stock for $86.33 million to a newly formed entity that immediately liquidated the corporations’ assets and generated artificial losses through Son-of-BOSS transactions to eliminate tax on the gains. The Federal Circuit upheld the lower court’s determination that the stock sale and ...