Opinion ID: 503838
Heading Depth: 2
Heading Rank: 4

Heading: The Tax Court's Findings of Fact

Text: 20 Taxpayers' final argument is that several of the tax court's findings of fact with respect to the sham determination are clearly erroneous. We note at the outset that the tax court's ultimate conclusion that the transactions were shams is itself a finding of fact which will not be reversed unless clearly erroneous. 9 Bail Bonds, 820 F.2d at 1548; Thompson, 631 F.2d at 646. The clearly erroneous standard is particularly appropriate when, in instances such as this, the sham determination is based in part on the evaluation of conflicting evidence and live testimony. Enrici, 813 F.2d at 295. Finally, as we indicated in a previous sham case, [t]he expertise that the Tax Court brings to bear in its consideration of these complex factual situations provides ... further reason to defer to its conclusion. Thompson, 631 F.2d at 646. 21 Application of these principles to the facts of this case clearly supports the tax court's conclusion that the transactions were shams. The entire program existed within a self-contained market operated and controlled by Mr. Gregory and his affiliates. The absolute power that Taxpayers conferred upon GGS to set contract prices and perform any act to alter existing contractual obligations, combined with the fact that no contract was ever enforced, entitled the tax court to infer that the entire program existed solely to provide tax benefits. 10 Even assuming the pricing formula utilized was commercially acceptable, the complete authority to manipulate and dictate the price and timing of the artificial transactions ... allows a taxpayer ... to reap larger and surer tax advantages with much less economic risk than he would have had he entered into real transactions. Enrici, 813 F.2d at 296. Indeed, no reasonable investor would surrender total control of his or her ability to profit or lose unless satisfied that the risk of loss had been greatly diminished or eliminated. In short, Taxpayers invested in a program designed to reap the tax benefits of real market investments without bearing the consequent risks. 11 22 Taxpayers' other allegations of clearly erroneous factual findings are unpersuasive in light of the economic realities surrounding the GGS-controlled marketplace. 12 The tax court concluded that the losses claimed by [Taxpayers] are not allowable because the disputed transactions constituted factual shams which were inspired, designed, and executed by Mr. Gregory and the two corporations controlled by him for the sole purpose of attempting to achieve tax losses for their investors. Brown, 85 T.C. at 1000. This conclusion is not clearly erroneous.