have five cases on for argument today and for the benefit of all counsel the advise you about the lighting system when the yellow light goes on your rebuttal time has begun and when the red light goes on your entire time has expired very well will hillary argument first number two thousand and eight five one nine zero sto be creek investments understanding was that they ultimately declined to give an opinion as to the validity of this program now they say they were reasonable in worked with the dickens and calculus for him providing information providing background data with respect to not only the family but with respect to total transactions yes they did one who busted that his for that two thousand and forty four and in whether or not two thousand and forty four here at actual fact impact on the transaction the judge miller's opinion give the taxpayer a reasonable cost well going back to the vero beach meeting back in january two thousand waterman is the one who was proposed or who who described the particular proposed david wells attuning david walker stated quite clearly that if he were similarly situated he had sufficient time confidence in the transaction that it would work for federal income tax purposes and that he if he were in the same position he conflict of interest that he couldn't get in and so i guess i'm not clear on it's true that that he told them that he that he might have a conflict of interest he offered what they were watering did however as he offered to forego any amount of th agreeing to receive its feet in january of two thousand and it was agreed at their time that it would be a four million dollars fee there was no payment that went from  caltech analysis it should or should not be focused solely on the effects transactions and actually should be focused on the transaction which gave rise to the x benefits which is the whole j n t strategy when that transaction that gave rise to with the contribution of the servant true star that was the actual transaction which gives rise to the to the tax benefits that would be the parallel to the caltech case income tax the parallel in the transaction transfer of the options in to or the assets into the subsidiary in caltech and into the partnership in jaipur transitory transfers those are actually the entities we're transitory well is a family office so it was in conjunction with the creation family office north channel and the creation of a family investment vehicle that the assets were transferred your facts options as well as the term of tru stock was transferred and still be crude but that would be the true the transaction contingent obligations constituted a liability for purposes of seven fifty two and that's why she went to the economic substance up there and because the president didn't exist to suggest that the contingent liabilities the contingent obligations constituted a liability i'm obligations do not constitute liabilities for purposes of seven fifty two she she seemed to include it seems to me that seven fifty two and homer were inconclusive or that it hadn't been established by precedent whether or not contingent obligations were liabilities under seven fifty two so she gave you the benefit of the doubt by saying we'll treat them as though we're not and will decide this case on economic substance but of course if they are and it seems like this is an open and shut case well the trends but the history of homer is that short positions generally established lower court certainly given the marriott opinion which just issued from our court saying yes they do constitute those contingent obligations yes they are to be considered for determining partnership basis under seven fifty two how does that not at the end of establishes a necessity of having collateral that's not the case with options such as were used in the still we create case that was used and still we create two so called digital options on foreign currencies those are triggered the section seven fifty four election that way that they sniff them are true stock the fact that still we creek may have had a legitimate business purpose in being an investment structure or d m well spam way has absolutely no completely disregard a transaction that lacks economic reality a step transaction and looking at the transaction being here you would say the whole j j hotel into strategy exactly that you know for example there is no business reason for doing it that if there is no potential step transaction doctrine in contrast is a subset of what's referred to as the substance of a form duct which says that ok a transaction may have economic reality may have an expectation of making a profit but what is the transaction really that the substance of it not the forms or when you got her into under substance of the form iris is entitle to disregard meaningless labels on a transaction and meaningless that's determine that's the tax code applies to the substance of the form so for example you and i can have a contract between us and it's a real business and this is a real deal and we're calling it a lease but that doesn't mean that i'm going to be steps there so the court found that the tax benefit survive this step transaction doctor and here to apply that here are the steps that are meaningless that you would take position are meaningless are the one that the transfer of the partners up to the was decided on summary judgment so in marietta court you have the opportunity to determine whether the shelter in that case had economic substance or not in this case we had a full trial the courts listened to all the witnesses looked all the facts determined that the transaction isn't an open and shut case when we reach the mushy doctrine of economic substance if the statutory language has otherwise been clearly interpreted to cover the situation i think that may be trying some cases but given the procedural posture of this case where  question we would be for the console consulting with the i r s i know that we've argued in other offsetting options cases that then sure an option is in fact as section seven fifty two liability we made that argument in mcguire's partner profit whether there's any business purpose for the various transfers but those are issues that could be separately addressed under the penalty area but that doesn't necessarily necessitate reaching economic substance when you've got texture of language that clearly the extent to which you think that smith is irrelevant even if the trial court relied on the flawed nature  that's exactly where i wanted to go get it is it the factual representations that were made by mr wells in effect right predicated on statements in the j n g opinion saying of course this only applies if there's a bona fide business purpose or is it factual representation in the j n g letter itself that are problematical or both i think it's both i mean the  as to those facts i'm going to run a taxpayer but that's what i want to make sure i understood that your position is your position that the factual representations you refer to are factual representations in effect made by mr wells or  representations by gene g that were incorporated into the letter it's actually both ok ok now tell me about the latter category the ones that were jane g s factual representations not representations them had a conflict in this case right was getting things were going to conflict but i don't believe that that either jeffrey wells or any of them well the risk of the family family would have known about i mean there's a lot of information that came up during the six sixty four that was the principal purpose and we knew that it was that it was intrusive disco and discussion on the part of the court not to allow that into that testimony but if it's true it seems to be that mr smith is accepting argue window that there is a business purpose to the transaction doesn't the accuracy of the opinion setting aside that representation isn't that essentially irrelevant since that representation is first and foremost critical of those e in a lot of sectors in actual fact there was a business purpose for each and every step they want oh ok but setting but what i'm focusing on is in other words what i'm trying to get it is does mr smith give you anything that is contrary to what the trial judge said the trial judge is focusing on the problem that there is no business purpose edge she saw to this transaction mr smith doesn't see anything as to that he's saying assuming there is in this opinion is accurate as far as it goes what does he give you that that is contrary to what the true or what mr smith gives gives is the fact that practitioner he reviewed the opinion in the mind of someone like the wells family there would be the opinion the way it was phrased the way it was passed through it was a reasonable opinion upon which they tax lawyers i'm bound in trying to structure transactions and in particular sequence is their business purpose for transferring me well see interest into the s corporations as a practicing taxpayer i can tell you clearly that there transferred as a gifts to family members because every time you do it causes a horrendous problem on a subject u k respect allocations of income it's a very very difficult problem to to encounter