Articles

Volume 25 Number 11 Wednesday, November 4, 2009

Reaching Beyond Its Grasp: The Latest Setback for Treasury's Use of Retroactive Regulations to Attack Son-of-BOSS Transactions by Del Wright Jr. In Murfam Farms, LLC v. U.S.,2 the Court of Federal Claims weighed in on a so-called Son-of-BOSS3 case and decided that Treasury had exceeded its authority in promulgating retroactive regulations to combat what Treasury deems an abusive tax shelter. However, the taxpayers' victory may be short-lived, as the court has yet to consider the economic substance of the transaction.

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PRACTITIONER'S INSIGHTS

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Temporary Regulations Clarify Ambiguity Regarding Limitations Period for Assessing Tax Attributable to Partnership Items On September 24, 2009, the Treasury Department issued temporary and proposed regulations, 1 which define an omission from gross income outside of the trade or business context for purposes of the six-year limitations period for assessing tax attributable to partnership items. These regulations adopt a position, contrary to that of two U.S. circuit courts, that an overstatement of basis results in an omission from gross income.

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Continued Losses Do Not Preclude Finding That Business Was Activity Engaged In For Profit Section 183 disallows a loss deduction where an activity is carried on solely for pleasure, recreation, or any other nonbusiness purpose. With respect to horse-breeding and horse-boarding operations, §183 is most commonly raised where an individual makes income from another activity but maintains a country house with horses to be used by friends and family, and then claims a loss with regard to the horse activity to offset the income from the other activity. In Helmick v. Comr.,1 Taxpayers — Husband and Wife — ran a horse breeding and boarding operation wherein they cared for as many as 60 horses on the same property as their personal residence. The issue before the Tax Court was whether this operation was an activity engaged in for profit pursuant to §183. On the basis of all the facts and circumstances, the Tax Court concluded that Taxpayers were engaged in a for-profit activity.

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