Tax shelter — or trap?

The Ninth Circuit today reverses the dismissal of a complaint for common law fraud and conspiracy against an accounting firm, a law firm, and others that the plaintiff alleges deceived him into buying a sham tax shelter.  Swartz v. KPMG, No.   (9th Cir. Feb. 12, 2007).  Theodore Swartz paid $1 million for services relating to his desire to minimize (i.e., avoid) capital gains taxes on the $18 million he received when he sold his business.

Blawgletter confesses that the shelter boasts an alluring moniker — "Bond-Linked Issue Premium Structure" or BLIPS, which helps explain why Mr. Swartz thought it would work.

But seriously.  The court did affirm dismissal of other claims because, it concluded, Mr. Swartz didn’t adequately allege reasonable reliance on false representations.

Blawgletter commends the opinion to the reading of anyone who, like us, prefers not to pay taxes but would also rather not get a sham (or even sham-ish) tax shelter.

Barry Barnett

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