IRS Puts Squeeze on ThighMaster’s Tax Shelter

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By Erin McManus

Two dubious inventions from the 1990s are coming together before a federal appeals court—Son-of-BOSS and the ThighMaster.

While Suzanne Somers was pitching the thigh-reducing device to television viewers, tax shelter promoters were selling the Son-of-BOSS (bond option sales strategy) to her husband, Alan Hamel, with promises of even more amazing reductions to the couple’s tax liability.

Some things are too good be true, as Hamel discovered when the Internal Revenue Service disallowed the $5 million loss attributable to the tax shelter. Hamel and his business associate, Clifton Lamb, a certified public accountant and former IRS agent with experience identifying tax shelters, “knew or should have known that a transaction involving an expenditure of only $400,000 could not generate a valid tax loss of $5 million,” the government said in a March 13 court filing ( Palm Canyon Investments, LLC v. Commissioner , D.C. Cir., No. 16-01334, brief filed 3/13/17 ).

Hamel challenged, but the U.S. Tax Court upheld, both the disallowance of the loss and the associated accuracy-related penalties. Hamel is appealing only the assessment of penalties to the U.S. Court of Appeals for the District of Columbia Circuit, claiming that he had reasonable cause to take the position he did in a Jan. 10 court filing.

Hamel said he relied on an opinion letter from the New York law firm Pryor Cashman Sherman & Flynn LLP and further investigated other individuals and firms connected with the transaction. Hamel had Kenneth Barish, a Beverly Hills, Calif., tax lawyer who was formerly with the Department of Justice Tax Division, and Lamb investigate “all aspects of the transactions, even overcoming their own initial skepticism of the validity of the structure,” he said in his court filing.

The IRS countered in its brief that Hamel was an experienced and successful businessman who “attempted to generate large, but wholly artificial (i.e., non-economic) tax losses through a tax shelter that utilized Palm Canyon, a limited liability company created for the sole purpose of implementing the tax avoidance scheme.”

To contact the reporter on this story: Erin McManus in Washington at

To contact the editor responsible for this story: Meg Shreve at

For More Information

Text of the IRS brief is at

Text of the Palm Canyon brief is at

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