JT USA, LP v. Commissioner

Opinion by Judge TROTT; Dissent by Judge CALLAHAN.

OPINION

TROTT, Circuit Judge:

We review de novo the Tax Court’s reading and application of a TEFRA statute 1 in a convoluted action arising from (1) a partnership’s attempted use of a bogus tax shelter to offset capital gains, and (2) the Commissioner of Internal Revenue’s subsequent denial of a $32.5 million “loss” claimed by the partnership to eliminate income tax liability on an asset sale resulting in a $28 million capital gain. The Tax Court ruled that a taxpayer holding both direct and indirect interests in a partnership may elect under 26…