United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 24, 2012 Decided June 22, 2012

No. 11-1242

106 LTD., DAVID PALMLUND, TAX MATTERS PARTNER,

APPELLANT

v.

COMMISSIONER OF INTERNAL REVENUE SERVICE,

APPELLEE

Appeal from the United States Tax Court

Kyle R. Coleman argued the cause for the appellant. 

Patrick J. Urda, Attorney, United States Department of 

Justice, argued the cause for the appellee. Tamara W. 

Ashford, Deputy Assistant Attorney General, and Kenneth L. 

Greene, Attorney, were on brief.

Before: SENTELLE, Chief Judge, HENDERSON and 

GARLAND, Circuit Judges.

Opinion for the Court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: 106 Ltd. 

(Partnership), a limited partnership, appearing through its tax

matters partner David Palmlund (Palmlund), appeals a 

decision of the United States Tax Court (Tax Court)
2

upholding the imposition of a forty per cent accuracy-related

penalty by the Internal Revenue Service (IRS). See 106 Ltd. 

v. Comm’r, 136 T.C. 67 (2011). The IRS determined that the 

Partnership had utilized a so-called “Son of BOSS” tax shelter 

to overstate its basis in Partnership interests by approximately 

$3 million and to thereby reduce Palmlund’s individual 

federal income tax liability by nearly $400,000. The sole 

issue before us is whether the Tax Court erred in determining

that the Partnership failed to establish a reasonable cause 

defense to the accuracy-related penalty pursuant to 26 U.S.C.

§ 6664(c)(1). As set forth below, we affirm the Tax Court. 

I.

A “Son of BOSS” tax shelter “employs a series of 

transactions to create artificial financial losses that are used to 

offset real financial gains, thereby reducing tax liability.” 

Petaluma FX Partners, LLC v. Comm’r, 591 F.3d 649, 650 

(D.C. Cir. 2010).1

 1 The shelter is a “variant of the Bond and Options Sales 

Strategy (‘BOSS’) shelter,” hence the name. Napoliello v. Comm’r, 

655 F.3d 1060, 1062 (9th Cir. 2011). The shelter 

 In 2000, the IRS identified the Son of 

BOSS tax shelter as an abusive transaction if used to generate 

artificial (i.e., non-economic) losses for tax purposes. Tax 

Avoidance Using Artificially High Basis, Notice 2000-44, 

2000-36 I.R.B. 255 (Sept. 5, 2000). The IRS also indicated 

involve[s] the transfer of assets along with 

significant liabilities to a partnership, with the goal 

of increasing basis in that partnership. The 

liabilities are not completely fixed at the time of 

transfer, so the partnership ignores them in 

computing basis. This results in high-basis assets 

that produce large tax—but not out-of-pocket—

losses.

106 Ltd., 136 T.C. at 70 n.2.
3

that “purported losses from these transactions (and from any 

similar arrangements designed to produce noneconomic tax 

losses by artificially overstating basis in partnership interests) 

are not allowable as deductions for federal income tax 

purposes.” Id. at 255.

Palmlund is an executive recruiter and business 

consultant in Dallas, Texas.2

In early 2001, Garza approached Palmlund about a 

foreign currency investment opportunity that was a variation 

of a Son of BOSS shelter. Although initially uninterested, 

Palmlund later warmed up to the idea. After Garza explained 

the mechanics of the shelter and its tax advantages, Palmlund 

told Garza that he wanted to consult with Turner & Stone 

about it. Garza encouraged Palmlund to do so, telling

Palmlund that he had worked with Turner & Stone on similar 

transactions in the past. Turner & Stone advised Palmlund 

that it had worked on similar shelters and recommended that 

He has previously held 

executive positions at several companies, including American 

Home Shield, Eastman Kodak and Merrill Lynch Realty. 

Palmlund also operated a real estate investment partnership, 

formed a family limited partnership called Palmlund Ltd. with 

the stated purpose of “investments” and actively managed

several personal bank and brokerage accounts. 106 Ltd., 136 

T.C. at 69. For the 2001 tax year, he reported nearly 

$2 million in income. Since the early 1990s, Palmlund has 

used Joe Garza as his personal lawyer, including for legal 

work related to wills and trusts. He has used Turner, Stone & 

Company, LLP (Turner & Stone), an accounting firm, to 

prepare his tax returns for more than ten years. According to 

the Tax Court’s findings, Palmlund was an active client who 

reviewed carefully every return Turner & Stone prepared. 

 2 Unless otherwise noted, the facts are taken from the Tax 

Court’s decision and from the parties’ Stipulation of Facts.
4

he proceed. Garza also “guaranteed” the transaction, 

promising to pay Palmlund’s litigation costs if the shelter

were challenged and to refund his fee if the shelter were

invalidated. Eventually, Palmlund directed Garza to take the 

necessary steps to implement the tax shelter. 

Using the Tax Court’s unchallenged description, we 

provide a brief summary of the shelter’s details. In November 

2001, Palmlund executed documents forming three entities,

all of which he controlled: (1) the Partnership, (2) 32, LLC 

and (3) 7612, LLC. 7612, LLC bought offsetting long and 

short foreign currency digital options with premiums of $3 

million and $2.97 million, respectively, from Deutsche Bank.

3

On the Partnership’s 2001 tax return prepared by Turner 

& Stone, it reported a basis in the distributed Canadian 

currency of $2,974,000. On Palmlund’s individual tax 

return—also prepared by Turner & Stone—he claimed a flowthrough loss of $1,030,491 from the distribution of the 

 

The actual cost of the options, however, was only $30,000—

the difference in the premiums. 7612, LLC transferred both 

digital options to the Partnership. Next, 7612, LLC bought 

$4,000 worth of Canadian currency that it then transferred to 

the Partnership. Finally, on December 26, 2001, the 

Partnership distributed thirty-five per cent of the Canadian 

currency—with a value of $1,400—to Palmlund Ltd., the 

family limited partnership previously formed by Palmlund. 

Meanwhile, at Palmlund’s request, the Partnership terminated 

the digital options on December 4 for a profit of $10,000, 

excluding fees owed to Garza for implementing the shelter

(which fees totaled either $72,000 or $95,000). 

 3 An option is digital if its “pay-off [is] a fixed amount if the 

option expire[s] ‘in the money’ or nothing at all if the option 

expire[s] ‘out of the money.’ ” Stobie Creek Invs. LLC v. United 

States, 608 F.3d 1366, 1372 (Fed. Cir. 2010). 
5

Canadian currency. In effect, Palmlund used the Son of 

BOSS tax shelter to reduce his total income by over 

$1 million and thereby reduce his tax liability by nearly 

$400,000.

4

 Turner & Stone initially understated Palmlund’s

loss attributable to the distribution of the Canadian currency 

because it assumed a distribution of only thirty-three per cent 

to Palmlund Ltd. Palmlund noticed the error and instructed 

Turner & Stone to increase the loss to reflect the thirty-five 

per cent distribution. Trial Tr. at 383.5

Part of Garza’s $72,000 or $95,000 fee was for the 

preparation of a tax opinion letter regarding Palmlund’s Son 

of BOSS tax shelter. Dated December 30, 2001, the letter 

consisted of four pages specific to Palmlund’s shelter and 

over eighty pages about general topics like partnership law, 

disguised-sale provisions and the treatment of foreign 

currency options. Garza’s letter concluded that Turner & 

Stone’s tax treatment of Palmlund’s Son of BOSS 

 Turner & Stone 

charged Palmlund $8,000 for preparing the 2001 tax returns 

for the Partnership, for 32, LLC, for 7612, LLC and for 

Palmlund individually. In previous years, it had charged 

Palmlund $1,500 for tax return preparation services, 

notwithstanding the fact that Palmlund’s tax returns before

2001—given his wealth and investments—were complex. 

 4 As the Tax Court explained, “Son of BOSS transactions 

usually yield capital losses, but Palmlund offset ordinary income 

because he attached the high basis to Canadian dollars, . . . [taking] 

the position that certain foreign-currency transactions may produce 

an ordinary loss.” 106 Ltd., 136 T.C. at 70 n.2. Palmlund’s 

reported loss from the Canadian currency was partially offset by 

other gains and his total reported loss from his interest in Palmlund 

Ltd. was $1,026,322. 

5 The Partnership distributed the remaining sixty-five per cent of 

the Canadian currency in October 2002 but no loss was ever 

claimed for it. 
6

transactions—including the overstated basis in the Canadian 

currency—would “more likely than not” withstand IRS 

scrutiny. 

In May 2004, the IRS first communicated with Palmlund 

by sending him a copy of IRS announcement 2004-46 which 

outlined the IRS’s proposed terms of settlement for any

taxpayer utilizing a Son of BOSS tax shelter. After meeting 

with Garza and with Turner & Stone to discuss his response, 

Palmlund decided to amend his individual tax return. He 

removed the $1,030,491 loss attributable to the distribution of 

the Canadian currency and paid an additional $394,329 in 

taxes. Palmlund did not amend the Partnership’s tax return. 

After initiating an administrative proceeding in February 

2005 regarding the Partnership’s asserted basis in the 

distributed Canadian currency, the IRS issued a final 

partnership administrative adjustment (FPAA) to the 

Partnership on May 5, 2005. The FPAA adjusted the 

Partnership’s basis from $2,974,000 to $0 and, pursuant to 26 

U.S.C. § 6662,6 imposed a forty per cent accuracy-related 

penalty to the underpayment of taxes resulting from the 

Partnership’s overstatement of its basis in the Canadian 

currency. The Partnership timely petitioned the Tax Court for 

a readjustment under 26 U.S.C. § 6226.

7

 6 See infra p.9. 

Subsequently, the 

Partnership conceded the tax adjustment and the Tax Court 

granted partial summary judgment to the IRS Commissioner 

on that issue. The Tax Court also granted partial summary 

judgment to the Commissioner on the issue of whether the 

7 32, LLC was the original petitioner because it was the tax 

matters partner for the Partnership. It dissolved in February 2002 

and the Tax Court appointed Palmlund as the Partnership’s tax 

matters partner pursuant to Rule 250 of its Rules of Practice and 

Procedure.
7

Partnership had committed a gross valuation misstatement

meriting the forty per cent accuracy-related penalty.

8

After a trial, the Tax Court concluded that the Partnership 

had not established the reasonable cause defense because 

Palmlund, acting on behalf of the Partnership, did not 

establish his “actual good-faith reliance on Garza’s, and 

Turner & Stone’s, professional advice” in overstating the 

Partnership’s basis in the Canadian currency. 106 Ltd., 136 

T.C. at 78. According to the Tax Court, Palmlund “could not 

rely on their advice in good faith” because Garza and Turner 

& Stone were promoters of the shelter, Garza’s opinion letter 

contained obvious inaccuracies, Palmlund should have known 

the transaction was improper given his business experience 

and Palmlund entered into the transaction with the intent to 

lose money. Id. at 81. The Partnership timely appeals.

 The 

only remaining issue before the Tax Court for trial was 

whether the Partnership had a reasonable cause defense under 

26 U.S.C. § 6664(c)(1) to defeat the penalty. 

9

 8 A “gross valuation misstatement” occurs if “the price for any 

property . . . claimed on any . . . return in connection with any 

transaction . . . is [400] percent or more . . . of the amount 

determined . . . to be the correct amount of such price.” 26 U.S.C. 

§ 6662(e)(1)(B)(i) and (h)(2)(A)(ii)(I). The Tax Court concluded—

and the Partnership does not appeal—that the Partnership 

committed a gross valuation misstatement because the Partnership’s 

reported basis of $2,974,000 in the distributed Canadian currency 

was more than 400 per cent of the Partnership’s actual basis of 

$1,400. 

9 Palmlund first appealed to the Fifth Circuit but, because the 

Partnership no longer existed—and therefore had no principal place 

of business—at the time Palmlund filed the petition for 

readjustment, the Fifth Circuit granted the Commissioner’s motion 

to transfer the appeal here pursuant to 26 U.S.C. § 7482(b). See 26 

U.S.C. § 7482(b)(1) (“in the case of a petition under section 6226,” 
8

II.

As noted earlier, the only question before us is whether 

the Tax Court erred in deciding that the Partnership, acting 

through Palmlund, failed to establish the reasonable cause 

defense for using a $2,974,000 basis in the distributed

Canadian currency.10

 

if partnership has no principal place of business “as of the time the 

petition . . . was filed with the Tax Court,” Tax Court “decision[] 

may be reviewed by the Court of Appeals for the District of 

Columbia”). 

“Whether a taxpayer had reasonable 

cause [under section 6664(c)(1)] is a question of fact decided 

on a case-by-case basis” and “[w]e review this determination 

and the findings underlying it for clear error.” Stobie Creek 

Invs. LLC v. United States, 608 F.3d 1366, 1381 (Fed. Cir. 

2010); see Am. Boat Co. v. United States, 583 F.3d 471, 483 

(7th Cir. 2009) (“Whether reasonable cause existed—and the 

findings underlying this determination—are questions of fact, 

which we review for clear error.”); see also United States v. 

Boyle, 469 U.S. 241, 249 n.8 (1985) (“Whether the elements 

that constitute ‘reasonable cause’ are present in a given

situation is a question of fact, but what elements must be 

10 The Tax Court’s jurisdiction to decide the accuracy-related 

penalty issue arose from the fact that the penalty “relates to an 

adjustment to a partnership item”—i.e., the Canadian currency. 

Stobie Creek Invs., 608 F.3d at 1380 (internal quotation marks 

omitted); see also 26 U.S.C. § 6226(f) (tax court “shall have 

jurisdiction to determine all partnership items of the partnership for 

the partnership taxable year to which the notice of [FPAA] 

relates . . . and the applicability of any penalty . . . which relates to 

an adjustment to a partnership item”); id. § 6221 (“[T]he tax 

treatment of any partnership item (and the applicability of any 

penalty, addition to tax, or additional amount which relates to an 

adjustment to a partnership item) shall be determined at the 

partnership level.”). 
9

present to constitute ‘reasonable cause’ is a question of law.” 

(emphases in original)).

A.

Section 6662 of the Internal Revenue Code, 26 U.S.C. 

§ 6662, imposes a mandatory accuracy-related penalty for 

certain tax underpayments. See 26 U.S.C. § 6662(a) (“If this 

section applies to any portion of an underpayment of tax 

required to be shown on a return, there shall be added to the 

tax an amount equal to 20 percent of the portion of the 

underpayment to which this section applies.”). “If the 

underpayment is due to a ‘gross valuation 

misstatement,’ . . . the taxpayer must pay a penalty of forty 

percent of the delinquent tax.” Am. Boat Co., 583 F.3d at 480 

(citing 26 U.S.C. § 6662(a), (h)).11

 11 Section 6662 provides for other accuracy-related penalties but 

the parties stipulated before the Tax Court that the forty per cent 

accuracy-related penalty for a gross valuation misstatement was the 

only penalty at issue. “Although partnerships do not pay federal 

income taxes,” “[t]he partners are . . . responsible for reporting their 

distributive shares of the partnership’s income or loss on their 

individual federal income tax returns.” Petaluma FX Partners, 591 

F.3d at 650. Thus, the forty per cent accuracy-related penalty is 

applicable to the understatement of taxes on Palmlund’s individual 

income tax return attributable to the Partnership’s gross-valuation 

misstatement. As discussed supra note 8, a gross valuation 

misstatement is “a misstatement of the correct adjusted basis by 400 

percent or more.” Am. Boat. Co., 583 F.3d at 480. 

 Section 6664 provides a 

defense to an accuracy-related penalty “if the taxpayer proves 

it had (1) reasonable cause for the underpayment and (2) acted 

in good faith.” Stobie Creek Invs., 608 F.3d at 1381; see 26 

U.S.C. § 6664(c)(1) (“No penalty shall be imposed under 

section 6662 . . . with respect to any portion of an 

underpayment if it is shown that there was a reasonable cause 

for such portion and that the taxpayer acted in good faith with 
10

respect to such portion.”). “The determination of whether a 

taxpayer acted with reasonable cause and in good faith is 

made on a case-by-case basis, taking into account all pertinent 

facts and circumstances.” 26 C.F.R. § 1.6664-4(b). 

One way in which a taxpayer can establish the reasonable 

cause defense “is to show reliance on the advice of a 

competent and independent professional advisor.” Am. Boat 

Co., 583 F.3d at 481; see also Boyle, 469 U.S. at 251 (“When 

an accountant or attorney advises a taxpayer on a matter of 

tax law, such as whether a liability exists, it is reasonable for 

the taxpayer to rely on that advice.” (emphasis in original)). 

By itself, however, “[r]eliance on . . . the advice of a 

professional tax advisor . . . does not necessarily demonstrate 

reasonable cause and good faith.” 26 C.F.R. § 1.6664-

4(b)(1). Rather, reliance on professional advice can establish

the defense only “if, under all the circumstances, such 

reliance was reasonable and the taxpayer acted in good 

faith.” Id. 

To be reasonable, reliance on professional tax advice 

must meet several requirements. First, “[t]he advice must be 

based upon all pertinent facts and circumstances and the law 

as it relates to those facts and circumstances.” 26 C.F.R. 

§ 1.6664-4(c)(1)(i). Second, “[t]he advice must not be based 

on unreasonable factual or legal assumptions,” including “a 

representation or assumption which the taxpayer knows, or 

has reason to know, is unlikely to be true.” Id. § 1.6664-

4(c)(1)(ii). Third, “the taxpayer’s reliance on the advice must 

itself be objectively reasonable,” Stobie Creek Invs., 608 F.3d 

at 1381 (emphasis in original), requiring, inter alia, that the 

advice not come “from parties who actively promote or 

implement the transactions in question,” id. at 1382; see also

Mortensen v. Comm’r, 440 F.3d 375, 387 (6th Cir. 2006) (“In 

order for reliance on professional tax advice to be 

reasonable, . . . the advice must generally be from a 
11

competent and independent advisor unburdened with a 

conflict of interest and not from promoters of the 

investment.”). “[T]he taxpayer’s education, sophistication 

and business experience [are] relevant in determining whether 

the taxpayer’s reliance on tax advice was reasonable and 

made in good faith.” 26 C.F.R. § 1.6664-4(c)(1). And, 

contrary to the Partnership’s suggestion, see Appellant’s Br.

19 (“Determining whether one’s reliance on an individual is 

in good faith is purely subjective.”), the inquiry is objective, 

“focus[ing] . . . on what [the taxpayer] knew or should have 

known at the time he obtained the [advice],” Am. Boat Co., 

583 F.3d at 485.

B.

 We find no error—let alone clear error—in the Tax 

Court’s determination that the Partnership failed to establish 

the reasonable cause defense because Palmlund unreasonably 

relied on both Garza’s and Turner & Stone’s advice. To 

begin with, the role of Garza “in promoting, implementing, 

and receiving fees from the [Son of BOSS] strategy” is more 

than sufficient to support the Tax Court’s finding that he was 

a promoter and therefore possessed an inherent conflict of 

interest. Stobie Creek Invs., 608 F.3d at 1382; see also New 

Phoenix Sunrise Corp. v. Comm’r, 408 F. App’x 908, 917

(6th Cir. 2010) (advisor’s “involvement in the preparation of 

many of the documents needed to implement the [Son of 

BOSS] transaction[] supports [Tax Court] finding” that 

advisor was “ ‘promoting’ the tax shelter”); Tigers Eye 

Trading, LLC v. Comm’r, 97 T.C.M. (CCH) 1622, 2009 WL 

1475159 at *19 (May 27, 2009) (“[A]n adviser who 

participated in structuring the transaction or is otherwise 

related to, has an interest in, or profits from the transaction . . . 

is considered a ‘promoter’ of the transaction . . . .”). Garza

brought the tax shelter opportunity to Palmlund’s attention 

and he “coordinated the deal from start to finish.” 106 Ltd., 
12

136 T.C. at 80. Moreover, Garza made money out of the 

transaction. Palmlund paid Garza a fee of either $72,000 or

$95,000 to execute the Son of BOSS transaction and Garza 

“wouldn’t have been compensated at all if Palmlund decided 

not to go through with [the shelter].” Id. at 81. In addition, 

Garza “recommended” the transaction to “[m]ore than a 

dozen” other clients and used a “[v]ery similar” opinion letter 

for each client. Trial Tr. at 299. 

With respect to Turner & Stone, it too implemented and 

profited from the transaction. Its tax return preparation 

services were essential to the execution of the transactions

and it had worked with Garza previously to implement Son of 

BOSS tax shelters for other clients. Moreover, the $8,000 it

charged Palmlund for tax return preparation far exceeded its 

normal charge of $1,500 and included research costs related 

to Son of BOSS transactions that it conducted for a different

client. As the Tax Court found, the inflated fee represented 

Turner & Stone’s “cut for helping to make the deal happen.” 

106 Ltd., 136 T.C. at 81. 

Furthermore, Palmlund knew or should have known that

Garza and Turner & Stone were promoters of the tax shelter. 

Garza “recommended” the Son of BOSS shelter to Palmlund, 

Trial Tr. at 299, and told Palmlund that he would “do 

everything” to implement it, id. at 55; see Stobie Creek Invs., 

608 F.3d at 1382 (unreasonable to rely on professional 

advisor if his “role as a promoter of the [Son of BOSS] 

strategy was evident”). One of Palmlund’s accountants also

testified that the Son of BOSS shelter “was referred—or 

brought to [Palmlund’s] attention by Joe Garza.” Trial Tr. at 

314. Garza’s fee statement included Garza’s work in the 

“Formation of LLC Disregarded Entity[,] Formation of 

Limited Partnership[,] Negotiations with investment bank and 

review of transactions[,] Legal Opinion Letter [and] Tax 

return preparation and review.” Statement for Services 
13

Rendered (Nov. 7, 2001) (Fee Statement). Palmlund also 

testified that he went through with the deal despite knowing 

that “[Garza] was not a licensed broker.” Trial Tr. at 120.

Finally, Palmlund knew Garza was performing similar

transactions for other clients. Palmlund testified that he knew 

Garza had “done this type of [transaction]” in the past, id. at 

50, and that Garza told him he was “developing a financial 

organization” to handle similar transactions, id. at 120. 

Palmlund also knew or should have known that Turner & 

Stone was working with Garza to structure and implement the 

tax shelter. See Van Scoten v. Comm’r, 439 F.3d 1243, 1253 

(10th Cir. 2006) (unreasonable for taxpayer to rely on 

professional advisor “directly affiliated with the promoter”). 

Garza encouraged Palmlund to seek out Turner & Stone’s 

advice regarding the Son of BOSS shelter because Garza 

“[had] been doing transactions with them,” Trial Tr. at 50,

and Garza informed Palmlund that “the accountants on [the 

transaction] would be Turner [&] Stone,” id. at 55. Garza’s 

fee statement “include[d] Mr. John Stone’s tax accounting 

fees for [the Partnership].” Fee Statement. John Stone is the 

Stone of Turner & Stone. Garza also made clear to Palmlund 

that he and Turner & Stone intended to handle all of the 

necessary arrangements to execute the Son of BOSS shelter. 

According to Palmlund’s testimony, Garza told him that he

“[would not] have to do anything” and that “[w]e will do 

everything. We will take care of the taxes. We will take care 

of setting up the accounts.” Trial Tr. at 55. 

Notwithstanding Palmlund’s earlier bona fide dealings 

with Garza and with Turner & Stone, we believe the Tax 

Court record establishes that Palmlund unreasonably relied on 

Garza and on Turner & Stone in this instance because he 

knew or should have known that his “advisors” were not 

providing independent advice and that they were in fact 

promoters of the tax shelter who possessed an inherent 
14

conflict of interest. See Stobie Creek Invs., 608 F.3d at 1383

(if taxpayer knew advisors were promoting Son of BOSS 

shelter, taxpayer’s reliance was “not objectively 

reasonable . . . , regardless of [his] longstanding relationship 

with . . . or the reputations of [the advisors]”). Accordingly, 

the Tax Court did not err in concluding that the Partnership 

failed to establish the reasonable cause defense to the forty 

per cent accuracy-related penalty. See id. at 1382-83; see also 

Am. Boat Co., 583 F.3d at 482 (“[C]ourts have upheld the 

imposition of penalties on taxpayers who relied on advisors 

involved in implementing [Son of BOSS tax shelters] . . . .”).

In addition, the Tax Court did not clearly err in 

concluding that Palmlund unreasonably relied on Garza’s 

opinion letter as a matter of law because it was “based upon []

representation[s] or assumption[s] which [Palmlund] kn[ew], 

or ha[d] reason to know, [were] unlikely to be true.” 26 

C.F.R. § 1.6664-4(c)(1)(ii). For instance, the letter relied on 

an “inaccurate representation . . . as to [Palmlund’s] purposes 

for entering into [the] transaction.” Id. The letter stated that 

Palmlund “believed there was reasonable opportunity to earn 

a reasonable pre-tax profit from the [Son of BOSS] 

transaction,” Opinion Letter at 3 (Dec. 30, 2001), but 

Palmlund’s banker, Charles Denson, testified that Palmlund 

said he entered the Son of BOSS shelter as a “tax 

strategy . . . and the intent was to lose money,” Trial Tr. at 

416. The Tax Court specifically credited Denson’s testimony 

and a trial court’s “credibility determinations are entitled to 

the greatest deference.” United States v. Erazo, 628 F.3d 608, 

611 (D.C. Cir. 2011) (internal quotation marks omitted); see 

also Pasternak v. Comm’r, 990 F.2d 893, 900 (6th Cir. 1993) 

(“Th[e] court must give great deference to the Tax Court’s 

determination pertaining to the credibility of witnesses.” 

(citing Anderson v. Bessemer City, 470 U.S. 564, 575 

(1985))). 
15

The letter contained other inaccuracies as well. It stated 

that Palmlund received the distributed Canadian currency “as 

[a] Partnership liquidating distribution[],” Op. Letter at 3, but 

the December 2001 distribution did not liquidate Palmlund’s 

partnership interest because it distributed only thirty-five per 

cent of the Canadian currency. Importantly, Palmlund 

demonstrated his awareness of this fact by directing Turner & 

Stone to amend his individual tax return to reflect the 

distribution of thirty-five per cent of the Canadian currency. 

The opinion letter also claimed that the Partnership “do[es] 

not even now know if [it] will be called upon to satisfy [its] 

obligations under the [digital options].” Id. at 28. By the 

time Garza authored the letter, however, Palmlund had 

terminated the options, eliminating the Partnership’s 

obligations under them. Accordingly, we see no basis upon 

which to conclude that the district court erred in concluding 

that Garza’s opinion letter failed to comply with the 

requirements of 26 C.F.R. § 1.6664-4(c)(1) and that the 

Partnership’s reliance thereon was unreasonable. See 26 

C.F.R. § 1.6664-4(c)(1) (“In no event will a taxpayer be 

considered to have reasonably relied in good faith on advice 

(including an opinion) unless the requirements of this 

paragraph (c)(1) are satisfied.”); Long-Term Capital 

Holdings, LP v. United States, 150 F. App’x 40, 42 (2d Cir. 

2005) (no clear error in concluding taxpayer did not

reasonably rely on professional advice for reasonable cause 

defense when “record provides ample support” for finding 

that advice “unreasonably rel[ied] on statements that the 

taxpayer knew were unlikely to be true”).

Finally, even if Palmlund did not know about Garza’s 

and Turner & Stone’s conflicts of interest, we find no error in 

the Tax Court’s determination that Palmlund’s motive for 

entering into the tax shelter and his business experience 

“demonstrate[] [his] lack of good-faith reliance.” 106 Ltd., 

136 T.C. at 81. As noted earlier, the Tax Court credited 
16

Denson’s testimony that Palmlund’s “intent was to lose 

money” on the tax shelter, id. at 73, and found that Palmlund 

participated in the shelter because of the “alluring tax 

benefit,” id. at 70. Although Palmlund testified that he made

investments only “to make money” and that he decided to 

enter into the Son of BOSS transaction based on a tip from a 

business partner’s daughter, Trial Tr. at 54, 44, the Tax Court 

“was not required to credit [Palmlund’s] self-serving 

explanation of his motives.” United States v. Bolla, 346 F.3d 

1148, 1153-54 (D.C. Cir. 2003). Moreover, the improbable 

tax advantages offered by the tax shelter—a $1 million dollar 

loss from a transaction that earned Palmlund $10,000 (less 

Garza’s fees)—should have alerted a person with Palmlund’s 

business experience and sophistication to the shelter’s 

illegitimacy. See Stobie Creek Invs., 608 F.3d at 1383 (no 

reasonable reliance if taxpayer had “sufficient knowledge and 

experience to know when a taxplanning strategy was likely 

‘too good to be true’ ” and selected strategy “because of a 

desire to avoid taxes that would otherwise be owed”); see also 

Pasternak, 990 F.2d at 903 (when tax deduction exceeded 

amount invested by fifty per cent, “a reasonably prudent 

person would have asked a tax advisor if th[e] windfall were 

not ‘too good to be true’ ”). 

For the foregoing reasons, we affirm the judgment of the 

Tax Court. 

So ordered.