Baxter v. Commissioner

The Fourth Circuit affirmed the tax court's imposition of back taxes and penalties attributable to taxpayers' use of an unlawful tax shelter. In this case, taxpayers claimed in their 2000 tax return substantial capital losses attributable to a Custom Adjustable Rate Debt Structure (CARDS) transaction. The court held that the tax court did not abuse its discretion in rejecting taxpayers' Daubert challenge; the tax court did not clearly err in finding that taxpayers' CARDS transaction failed both the subjective and objective prongs of the economic substance test; and the tax court properly found that taxpayers failed to establish reasonable cause and good faith for claiming losses based on the CARDS transaction. View "Baxter v. Commissioner" on Justia Law