and however we don't think the court the things the court seem to rely upon in his final ruling is to you know what's unknowable were the things that we believe the government have the burden to show to go forward with evidence on and because what they did was they had a bunch of why didn't she fs you know why didn't you pursue arbitration didn't pursue arbitration why didn't you pursue these two other parties  point that by using the unknowable standard from the th circuit that that that's where the burden shifting effectively or that's where the burden shifting and effect really occurred because you know for a reasonable prospect of recovery to exist that the the that is the standard is that it has to lead to a substantial possibility that  the plaintiff would recover you know would succeed on the claim and just sixteen on the claim i think in this case means getting money and the government showed no evidence that these would ever leave any money and in fact there are a couple  a rd party who was not a party to who you never dealt with and nd of all i don't think there's even any real evidence that he knew about his the capital in two thousand and four if we're saying what he knew or should have known in two thousand and four the only thing that the only reference to the capital was in the indictment which did occur in two thousand and four which also include which is also the year in which you had certain other things happen like they pled guilty and they  the fact i think i knew about the indictments he knew that there were forfeiture requests in the indictments seeking all property and he knew that that they were seeking to bar them from practicing right correct those scheme and again at the end of the day there's no he was also indicted he was also convicted he also had cooperation agreements in two thousand and four so there's no evidence that he had any assets that there was a substantial possibility that would that pursuing him would any losses relating to the my time there's a possibility that he could have he was certainly included in the notices that he could participate in restitution he was a victim but it was never really clear whether he could or could not well use and he had small holdings and in at least one of those two star right great he had a small washington was never listed my term was not listed and i think that also gave him some can his feeling was that he should not be pursuing that also there's no evidence there is there only evidence the record which goes all way through two thousand and ten i mean two thousand and fourteen was there was very little recovery on those restitution to inquire further in two thousand and four about for example how to ski how to see capital about the other things that were at least theoretically but tensional sources of their monetary or whatever there was no evidence of what it would cost you just felt like he'd spent a great deal of money up to that point in the arbitration  twenty five dollars or thirty thousand dollars at that point and then he hears these people groan dieted and he said you know you're going to be in that they have these these cooperation agreements and that they also lost they also reading forfeitures and that's were in fines and he was of the opinion you know there's nothing left here and he'd been down that road before in two thousand and one with another case which he did pursue all the way to judgment and discovered that he wasn't eating anything in that point so i think his his feeling was that after the indictment occurred in these four parisian agreements occur and the and the loss of  regulatory interpretation point that the question is not whether there was this is a prospect of we covering the entirety of the loss but just some of the known trivial recover chance that half or some large portion was going to be recovered if there was a lot if there's a chance of a large recovery that he knew about in two thousand and four yes or that came up later and there's no evidence that any of these things ever was going to lead to money even later even obviously capital and again it would have required your stamp will prevail and all kinds of other things to get to us account for with whom we had no brevity so so  acton's you know had lost the money and there was no he did not seem any avenues of recovery and i think that speaks volumes here also you know as we as we said last time we were not the same as a pump and dump but it's analogous i do believe i mean this is a securities crime in which he he lost money and the reg actually says and other similar indictment is really clearly the year in which people have lost a great deal of money and and lastly the last clear thing we want to mention is that the failure to turn over evidence or that i think was clear error by the court in that if they're going to raise all these things about subsequent issues of things we didn't pursue in not turning over the criminal files or donovan company records made it very hard for us to to pursue that line of appeal to them because there was no evidence of you know the records were with the government and if they were going to raise it they should at least put on thank you so tell us when the government thinks this loss was incurred your honor that's that's an excellent question the last time the government was before this court on appeal we were focused on  the taxpayers abandoned their arbitration claim two thousand and eight now this court instructed a court of federal claims and us on that henri man the analysis should be a holistic analysis based on all of the facts and circumstances and i know this is not the answer that you want to hear but on this record which focuses on two thousand and four because that is the year the taxpayers claimed their loss and it's difficult to say at exactly which point there was no reasonable has spiked of recovery the facts simply haven't been developed for the other years because the taxpayers chose to put all of their eggs in the basket of two thousand  they could have of course filed claims or alternative years they chose not to do that and fact with respect to two thousand and eight they could have filed a timely refund claim nearly a year and a half into this but occasion and they chose not to do so so it you know unfortunately it's difficult to say looking at a holistic analysis what particular here is the right year and importantly it's the taxpayers burden to show reasonable certainty of a reasonable prospect of recovery and yet if you go through the claim court's decision you almost never see that it's the end of and discussed she goes on and on and on about th a no ability that it comes out of a th circuit case that arguably wasn't even important to the ultimate decision in that case because the facts were so much different from the facts here and so what are we supposed to do with the fact that we said what the standard is and now we've got the court below telling us they used a different standard that they said that it's unknowable you therefore can never satisfy your burden so your honor one of the formulation was cr to alternate formulation i'm sure you remember in its prior opinion and one of those from relations of the test is that at the taxpayer must show that it can be ascertained that with reasonable certainty that there will be no recovery and that to the two tests the court gave in the prior opinion where the st year in which no reasonable prospect of recovery exists anymore starting with your discovery which is what you're thinking of and then in a footnote this court said that thousand and four that there was no reasonable prospect of or can now turn to a standard with reasonable certainty that there will be no recovery and so as the court of federal claims explained if it's the case that in the year the taxpayer has chosen things have not crystallized sufficiently to know with reasonable certainty that there will be no recovery or to know that there is no reasonable prospect of recovery the taxpayer has to wait and how the fact that the court focused on in terms of crystallization that's part of my problem it centrally the board and the government can see that that you know the main bad  be wrong doers and all of their assets were not going to be reachable and so that the court goes and looks of things around the margin that perhaps you could have brought a claim against  gamble but there's no evidence anywhere that odyssey capital was somebody that a claim could have been brought against and then they say perhaps you could have gotten restitution even though your stock wasn't in in the scope of the restitution order i mean i know these are just ok maybe you could have taken a wife you know you could have thrown a hail mary pass and spent a ton of money to get to grab some little bits around the edges this goes back to what what judge toronto was talking about which is it's not a question of is there are reasonable prospect of a big recovery mean the court simply focused on could you get a pittance and spend a ton of money and time to get to a pittance is that enough to be a reasonable prospect of her your honor the court's focused on the fact and this comes from the supreme court's decision and forty five that while the taxpayer subjective belief about what will happen may be considered that it's the objective evidence on the record that must govern and in two thousand porch found that he was aware that they intended to plead guilty but in two thousand and four mr adkins did not know anything about the assets that could be available for recovery and could not have known about the financial obligations that the defendants and made and their cooperation agreements and their plea agreements they could not have known in two thousand and four how many victims there were the extent of the losses in the case they knew their own of course but they didn't have the information about the rest of the picture and so in two thousand and four it was simply not possible to know that the likelihood indictments also included securities fraud charges which require restitution to victims and that's of course a rd independent avenue of recovery but that the court of federal claims on was unknowable in two thousand and four and like i say i presided over a lot of trials having to do with securities fraud and other forms of fraud i never found any where more than a few pittance more than a few pennies were ever scheme and maybe a little bit different from other kinds of fraud and that the people presiding over the fried in this case the donlin company principals do often make actual money taxpayers filed a motion to compel in the discovery process that motion to compel such an enormous range of documents many of which were protected by for example taxpayer privacy and section sixty one dollars of three of the internal revenue code they respect to that issue the tax treatment of every other victim in the scheme which clearly the government is not able to turn over that's protected information they asked for the entire criminal investigation files of the related criminal case this year the f b i determined that unsurprisingly many of those documents are protected by for example a grand jury privilege and other issues now the parties told the courts  just said you don't get anything so importantly that the court did not tell them to use five thousand and sixty the taxpayer's never renewed their motion to compel after they and the government agreed together that they thought they could resolve the issue it was perfectly within reason for the court of her claims at that point to deny the motion to compel all the parties they can resolve it so you know i'm going to deny the motion and then later the taxpayers never raise the issue again except for  they did not make a motion and they did not meet the requirements of rule five thousand and sixty so again the court of federal claims to the extent i could even be considered a request under rule five thousand and sixty properly denied any requests that they might have been making because they about the prospects of recovery well your honor i certainly the adkins's or their attorneys could have made some efforts to determine the assets that these folks had what i'm trying to well certainly you know lawyers are well versed in doing property and assets riches they could have looked for other liabilities that these folks may have had whether they were a judgment against those assets that are not my or do any discovery  criminal procedure proceedings are pending the indictment but the important thing is what was known are available in two thousand and four and it what was known or knowable in two thousand and four is that three of the ford on one company principals had been indicted any additional efforts would have been exceedingly unlikely to turn up anything and or exceedingly expensive with that play any role in the conclusion that that we're presented with here we're on or that the test is this very broad holistic analysis facts and circumstances to us so are hypothetically factors that could be considered but here there is no evidence of how expensive it would be or what kind of efforts they looked at and indeed it and quite frankly i think it might have been difficult under even the best circumstances with some of her the best i've heard from the taxpayers here in two thousand and four simply because things were so unsettled with respect to the criminal defendant now mr freeman is it so your case really does come down to this idea that it's if it's as a practical said but the court also said that the that the controlling factors are objective evidence and not the taxpayers subjective belief of what was going to happen here and here in two thousand and four  indictment and made a lot of conclusions that were not supported by the objective evidence and i add like if i may to move off of the folks who were indicted in two thousand and four and talk for a moment about mr freeman mr freeman was one of the four principals of dunham and company that's a factual finding a court of federal claims made that the taxpayers have not challenge on appeal until just a few moments ago and mr freeman  mr freeman was the only of the four principals with a personal connection to the taxpayers accounts and in two thousand and one and two thousand to two are important years for the fraud that occurred here mr freeman is listed as the account executive or the investment representative on numerous joint and single held accounts by the taxpayers here at trial mr adkins unprompted recognize mr freeman's name on a document and then the next day a trial he said oh no i don't know that person and then upon further questioning admitted that he had dealt with mr freeman the court of photo claims finding that mr adkins had dealt with mr freeman unlike the other three principals who were included in concerns the taxpayer may have had in two thousand and four regarding the three donna and company principles that were embedded in two thousand and four could not have applied to mr freeman the taxpayers are required to reasonably exhaust avenues of recovery before benefiting from a tax deduction for essentially benefiting from the government subsidy of their loss the concept is to show with reasonable certainty that there will be no recovery the taxpayer has must explore the indictment will be treated as the year of loss so that right that's correct so what's the underlying rationale why that might make sense in that context but not either more generally or at least not in the current account so there are a couple of things that distinguish ponzi schemes from a pump and dump scheme for tax purposes one of them and maybe this is for tax purposes but just as a practical matter the to know that they have a wasp or to discover that loss and any are except for the or the indictment that's often you know when the news breaks is when those that was laid out as i am to stand what you just said that would explain why they shouldn't know about it before this case is fundamentally about why in this case d you think they had to wait later until later so why if the year of indictments in the because of the falsified amounts that people are reporting on their tax returns you know here the taxpayers received monthly statements and ever claim the statements themselves befalls or as they claim the and we acknowledge that the price of the stock was pumped up in the pump and dump scheme but in a ponzi scheme there are sometimes receiving a small payouts to sort of keep them in the game and that trying to figure out the tax treatment once the bad guys are in indicted it's really quite clear that the victims are not going to get anything doesn't that tell one something about whether the indictment of the bad guys here is in the absence of other information or really quite good reason to have a reasonable yes or tain meant to that there's not going to be any money no your honor so then the focus of the i r s revenue procedure is not on this issue of a reasonable prospect of recovery it's on the year of the discovery of the law and it this is why the difference between a ponzi scheme and a pump and dump scheme matters because more generous terms for the word deductions than maybe generally applicable and here the i r s revenue procedure  mean you're trying to argue that they're not analogous the point is that they are right now as the only difference is you're saying the government has the right to be nicer to certain victims than it is to other victims and you know that's a fair argument but it's kind of difficult for you to say the games and these types of schemes are at least analogous for purposes of how easy it is to go after people who have been indicted and where the government is seizing on the bare earth your honor and of course there are some similarities yes between between the two frog schemes but there are differences between the two kinds of schemes that help to explain why the i r s has provided the special treatment for ponzi schemes and the general rule applies inside of that special  the taxpayers in this case chose when they file their refund claim all the refund claims which were signed by attorneys so they had professional help and families refund claim and the taxpayers chose to identify two thousand and four as the sole your of their boss the variance doctrine limits them to two thousand and four as the year of the loss a subsequent tax refund litigation like this and as a result the evidence in this case has focused on the only year that the taxpayers could look to because that's how they chose to frame the refund images two thousand and four and am sorry your honor but the record here simply does not give enough information regarding the other years because it was focused on two thousand and four to answer your question with any certainty and i apologize for this it's still d possible  can be filed in than three years of when the return was filed and at this point we're quite a distance from the years that we're talking about but as i mentioned earlier when this case began in two thousand and ten there was still time be facing this unknowability i don't know as we don't know what anyone want and the government didn't produce the documents so who knows what else if any would have right we are honored that the government did produce a number of documents to the taxpayers the government as i understand it is that at least as the government stood here before you last time you know under the court of federal claims his interpretation of the regulation which has hurt reverse our position at that point was that two thousand and eight was the right  and within the timeframe of this litigation they still could have filed a timely refund claim and nonetheless they chose to leave am i saying it's you know isn't working or at least the representative of the i r s and originally agreed that two thousand and four was the correct year appeals process doesn't have anywhere near the kind of discovery procedures and such that litigation does and so you know the iris appeals officer have all the facts at his disposal did he you know how much follow up to the how much questioning did he do with the information the taxpayers provided and that's it that's an entirely very different process from litigation standard and the reasonable problem possibility for every standard as this court point out with the with the split side of the same point they are a different point and certainly when it becomes reason we certainly know reason likelihood of recovery is is there is is what the court was saying is that clearly in this case you know you have to have some certainty that you think that it's not going to lead anywhere nd of all there was some question about discovery of their assets throughout the arbitration proceeding discovery was produced against these these defendants the criminal defendants as well as donovan company and nothing was ever produced by them to to mr reckons attorneys throughout the record and testimony i think the court ask good a good question as to when the when is the deduction think i think there's several points in the record that always that made clear where the money went there was jack seventy six which was a long article that got into the record by an investigat reporter that said that the money went to were going to crime and that is that's also shown by the charge of money laundering in the indictment we believe and the fact that the record was sealed for a period of time and that all these defendants agreed to cooperate with who were they cooperating with you know where they cooperated if they were all part of the same scheme obviously they were operating for something so i think there's some of that also obviously the tech boom ended around that time and i think that if they were invested in tech stocks or other you know other moneys would have boeing so i think we have some idea where the money swim went on in that regard  doesn't for from his information just as i said he recognized the name but he didn't really they never went after him and arbitration and they would have if they thought he was enough of a part of it so again that was not done and but you know clearly in two thousand and four was really when the roof caved in on these people and we believe that that that was when the loss