the necessary qualifications and i just like to say to my colleagues and to kristen on a personal note that it's been a delight having her in chambers for this past year getting to meet her mom and her sister who she's very close to getting the delight of interacting with your on a daily basis her wisdom and her great advice on cases and just having her there in general she's decided that after her year with me she loves cooking so much that that's what she's going to the foundation of the government's case is laid out on pages ten eleven and thirty eight of its brief is as follows faber conceived and markedly through the g i tax avoidance strategy called o p s it's the o p s and f b i s are characterized by the government as strategies global schemes those are not tax shelters in fact if you look at the statutory language of section sixty one level the statutory language is contrary to what the government is ordering the government argues that o p s is a strategy that d i s is a strategy that should have been registered section sixty one eleven does not require registration of a strategy a global scheme an idea or concept so what what in your view was the tax shelter here was the individual transactions between you and each individual customer because that's exactly right and did you register each of those not one was registered and that's the important part of this case in order to impose a penalty you must have failed to follow form eighty two sixty four if you look at former eighty two sixty four and that's a pages one seventy one through one eighty four that that form requires for each track shopper to be reported to a number of things including the maximum aggregate amount to be contributed to the investment the track shorter ratio for the investment which is how much money and property is contributed by the investor to the investment the principal asset of the investment and the date the principal asset was a made it seem to me that the word investment has two quite common different uses is what is the thing into which you put your money and the other is the money you put into it the government's position is it not and it seems to me as i read the statute it's pretty clear what the statute itself of the statute uses the term investment as the thing into which you were put in the money and so when it says it has released to a fifty thousand dollars one hundred in the ninety two investment vehicles generally partnerships sometimes l l c you have them being invested in with as the statute requires before maybe there are three possible things here because i want to know what this one hundred ninety two is is that a number of persons let's call them persons natural rather wise that put money into something or are there individuals or persons putting them here we generally speaking your honor each of the one hundred ninety two transactions involved one partnership l l c and generally it was one individual does and that is because the actual investment line of the check the contribution may not occur until after the offering of interest in the investment so so the statute says you must file this form before offering interest and the answer to when it is filed comes in the actual form i beg this court before reaching the decision please look at form eighty two sixty four you will see that it is absolutely impossible to take a concept or strategy like o p s and  determine what the principle asset is going to be and the date the asset was acquired we're talking about three to four years later the dollar amount of finance and the dollar amount of course the tatchell to ratio none of those can be determined when an eighty to sixty four is filed if this is just a strategy or a concept or an idea none of those are investments payment to be made with respect to a divisible transaction so each of o p s in f t s f b i s types there was a payment made which matched the amount of penalty calculated for those two transactions and understand task obviously a case out of this for a test case it was the term that's the term a test case takes place where a determination is made with respect to all of the other similar transactions in this case the one hundred ninety transactions and this is a this is an incident happens over as a matter of ninety here's the government would not would it be subject to non mutual issue preclusion or because the government isn't the subject and not mutual issue preclusion so how does that unless the government just practice than in the same cast services case out of this or this court which is referred to in our brief but what typically happens is that when the divisible payments or my own decision is reached by the court at some point generally the government counter claims for the rest of the amount in this case the one hundred ninety transactions portion each and everything is made a part of the c transactions your honor in the years that i've been involved in these cases i've never seen the government not counterclaim for the additional amount but to enter the courts question directly if the issues are decided by the court with respect to two of the one hundred twenty two transactions the legal issues are the same for all of the transactions and i think collateral estoppel i think a lot o squabble would apply and that's because maybe i was wrong when i refer to not mutual issue preclusion in fact since it's just the diversified group and paper that is the penalized have offsetting options buy and sell options you know you small net is actually invested by the investor can government take just one and apply the one percent to that and that's how you get forty two million dollars instead of less than two million dollars that issue applies to every last one over one hundred ninety two transactions this is just really basic we don't get any of these tax cases here you're  question are you knowledge ing that none of the taxpayers of the hundred ninety two ever filed the form eighty two sixty four never register that is correct your so how would they not be liable for not registering have the very first or the one that applies to all one hundred ninety two transactions is that the tax shelter ratio which must be greater than to one was not met and that's on the merits but the type to ratio of must be greater than two to one that actual for ratio was incorrectly calculated by the government if we went on that issue all of the one hundred ninety two transactions were not tax shelters under section sixty one  tax shelters before you get a substantial investment you first have to decide is the tatchell to racial test met and that tax shelter ratio is determined transaction by transaction you take each in this case litigation vehicle you take each vehicle each investment vehicle you calculate the amount of deductions or credits that are being offered you compare that to the amount of money in property that was contributed and you determine was the tax shelter ratio test met for that transaction again each of the one hundred ninety two transactions over four years had its own separate tax shelter ratio that is what is one of the reasons why a form eighty two sixty four could not have been filed in one thousand nine hundred ninety nine with respect to a two thousand and two transaction you didn't know with the tax good morning good morning me please the court i'm francesco got any counsel for the united states i'd like to respond to the appellants principle argument in this case that each instance of filing a form eighty two sixty four was a standalone registration such that the two forms filed no in fact that is the appellants have contended that each one of each instance of selling one of these tax shelters required a separate form under the regulations well under the statute you file the tax shelter before any sales are even made then if you make further sales of the same arrangement and those sales differ with respect to one of five categories this is the a list this in the regulations those categories include principle asset financing methods to actual to ratio then the tax shelter organizer is required to file another form notifying the i r s that we made a sale this this piece is different the regulations explicitly say that and before they had any customers for it this statute says that the registration any tax shelter organizer is required to register not later than the day on which the first offering for sale of interests and such review fifty million dollars in order to get into court to be true that you didn't have to pay it the the basis for the government's argument here is the full payment role which this court and the supreme court have acknowledge exact question that was constant that's the question is it several because if it's not separable if congress did not make this a several or divisible tax than the taxpayer has to fully pay the assessed penalty before he gets to statutory language because the case law about the divisible tax exception is rooted in qana in how the tax or the penalty is imposed supreme court in florida and the other courts that have adopt that have recognized the exception have observed that in taxes divisible when the assessment is composed of multiple individual assessments so the tax is actually for example an excise tax is imposed one hundred dollars per sale so the internal revenue code imposes the tax on a per transaction basis ok i didn't know that the right sense and if it's this is then he plans to everyone but i still keep coming back to thinking about the claims you review the underlying physical the underlying facts here are similar among all one hundred ninety three shelters and two there which is the key which is the reason why the government treats them and why they are treated under the statute and regulations here as a single to actually answer so you know what what are your best points under the statute i guess in particular for why when i think this is coming down to  ok so in that first paragraph under age twenty two it says similar investments are offered by the same person are aggregated together and explains that investments are considered similar if they involve similar principal business assets and similar plans as well that you must use two new songs where you can you see i think our argument here is that the only piece that needs to be decided it is whether these is whether the statute imposing the penalty on a singular failure to file or whether the statute imposes the penalty on each instance of a failure to file one of these forms for multiple sales of these transactions can i take you now what you just showed us and that you question in forty eight deals with filing a separate eighty two sixty four but tell us when you're saying they were required to file two of this form at the get go right where they sold any of the before they had any investments correct and so how could you possibly fill out all of these questions with regard to the value of properties of cash and all of the stuff how could you know that when you have gotten any investments and normally when a tax shelter promoter organizes an investment they do have an idea i mean they create marketing materials to market these to potential investors so they have they have marketing materials that that say these are the types of assets we're going to invest in here it was foreign currency options other tax shelters they know maybe it's going to be a piece of depreciate all property so they they know and they have these estimates they have these ranges that they market to investors that if you are willing for example in this case the way these shelters were marketed is that a tax loss is available dollar for dollar for it for the amount that you were willing to spend on a long option now economically that would then be offset by the short option but what was done here is they would first purchase this long option contributed to the partnership increase their basis not offset their basis by the offsetting liability and touted that the i mean i have not seen the marketing materials in this particular for these for every one of these transactions a number of the transactions that they were penalized for in this case have been the subject of other decisions on the merits b courts of appeals that have looked at these that looked at these materials these were all marketed tax shelters where the investors were told for each dollar you contribute towards this this long option you will get a dollar of inflated basis that will then become a dollar of tax loss and so the amount of the tax loss was sort of up to the investor can help you put it right how much are you willing to put in and if you look at the spreadsheet that the i r s it is in the record and i can provide you with the cite the the i r s when it was computing the penalty here if the penalty was one percent of the aggregate amount of vested so the i r s totaled up the amount that all of these different investors spent on a long option and you'll see that it ranges almost all of them were over a million dollars most of them that mean that you have to keep on this for a minute for you in that the regulations specifically say that if the tax shelter changes you can amend it but if you use the same registration number because the tax shelter has already been registered you're not required to amend it their regulations also say that if you sell another instance of this investment to a nother purchaser and it varies with respect to a particular category then file a new form but then the regulation specifically that these similar investments are still treated as a single tax shelter so it unequivocally clarifies that even though multiple forms might be required to keep uprising the i r s of these investments that have been sold they remain part of a single t i just also like to respond judgment to the point that you made about asking a taxpayer to come up with this money i think you would use the example of one hundred fifty million dollars to be able to come to court to test the case out in this in this case that the amount is actually twenty four million which i recognize still a substantial amount but i'd like to point out that the the appellant secured when i thought it was seventeen million from the end of the original assessment the assessment was forty two million dollars but it was think i would be happy i know there is a supreme court case i cannot recall the name i think it might be burns i'd be happy to send it as a means you want each a letter to the supreme court has addressed the issue of whether this pay first litigate later doctrine in federal tax law satisfie something come out but here we're not permitting them even to do this right and the reason we're not doing that the reason they're the court of federal claims would not permit them to do that is because the because of the full payment will was just part of right i mean that that is i think there are many taxpayers that have felt the same way you have in terms of the potential unfairness of the pay first litigate later will but it is the whole thing that they're hoping that which  review and settle cases and they opted not to go to appeal so they did have some prepayment for him to challenge the method in which the penalty was computed so he can as one or more church suppose depending on whether one thought there were one hundred ninety two shelters or two ships i think it would probably be the same across the board because i think the the argument the arguments on the merits here have to do with what the i included were didn't include in the calculated quote investment base and the quote aggregated amount invested these are terms from the statute used to compute the penalty so i guess the that my understanding is that the dispute here really has to do with what's the appropriate formula for determining whether something is a tax shelter and then what's also the appropriate formula for determining whether the amount of the penalty if it is a tax shelter and i do i believe that the appe have raised a reasonable cost offense because there is a defense to the penalties based on reasonable cause thank you thank you zero one one zero that's the first page of the iris calculations transaction by transaction and then look at a one seventy one so if you put a figure on one ten and finger on one seventy one you'll see that if you look at one tim it's not just this one short leg number that they're looking that there's the broker fee there's an accounting firm fee there's a law firm there are other fees there are other second cash contributions there are a number of things which fall into the category of the amount invested by the investor three and they set up an l l c and the moment they put that out that's a tax shelter before anybody puts any money into it and i think whether or not they have somebody lined up i don't think matters  that's when they have to fill this gap that's different from the retrospective calculation of the amounts which they can use all these retrospective numbers so what i'm trying to understand is your position which i think i absolutely at the heart of your case at least as i'm hearing it is that if you look at eighty to sixty four it makes sense for one hundred ninety two shelters it makes no sense for two shelters and i need to understand very concretely why our police look at once only one year on that's page one and then page one seventy two of the same form eight to sixty four in order to calculate for example tax shelter ratio that's required to calculate tax shelter racial look at part roman numeral two investment banks cash contributed adjusted basis of property contribute contribute to all of these things you cannot possibly know your down on the page to work she part to which message but we're going to page one which is ultimately how you fight reaches sixty four i'm sure i can you go back to i don't know maybe it's not related to it but your friend there's a separate eighty to sixty four required why wouldn't that i wouldn't use the word outlier because one of the things that requires a four separate form eighty two sixty four is if the principle asset is different and it's different throughout it's sometimes foreign currency sometimes domestic currency it is an if the tech show to ration is different you must file a separate forms eighty two sixty children racial is different throughout these and that is clear from well right that's true i don't know where that gets you that means that your client should not just to file one eighty two sixty four form but should have filed maybe one hundred of them as that these were not tax shelters under the statute because of the title two racial test not being met because of substantial investment there are there are arguments reasonable part of their argument on the merits as to why these were not tap shoulders but that's on the meri here we're talking about can you pay on a divisible basis for one transaction or two transactions and satisfy the jurisdictional requirement that is that is what this this case  about and i have to just the basic questions are if we were to conclude that it was you had to file a separate tax up to form for each of these two entities and those the tax office were talking about the only issue the issue is whether or not you appropriately you could have required under law registered your tax dollars isn't that sort of begin and almost in the case with respect to your client and that issue deals with what your client did not respecting each of the that you've only had to one or two failures that you should have filed one or two eighty two sixty four so that's the jurisdictional argument our argument is that if the government is right and these were t the entire assessment that is what this case is about merely a stab jurisdiction because this penalty if it was imposed correctly and that is the issue of marriage that had to occur when a form eighty two sixty four was required to be filed for each and every one there is i said it before i will say it again it was impossible if you look at this poll it was