Opinion ID: 503838
Heading Depth: 2
Heading Rank: 3

Heading: Admission of Evidence of Other Transactions

Text: 17 Taxpayers argue that the tax court erred in considering evidence of transactions of other investors in concluding that the investments were shams. The court admitted the evidence in order to determine whether the Taxpayers' transactions were bona fide. See Brown, 85 T.C. at 972 n. 6. 18 We review the trial court's decision to admit or exclude evidence based on the issue of relevancy for an abuse of discretion. Lies v. Farrell Lines, 641 F.2d 765, 773 (9th Cir.1981). 19 Federal Rule of Evidence 401 defines relevant evidence as evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence. The tax court admitted evidence of other investor transactions in the GGS program as relevant to the sham determination. As discussed above, at least part of the sham analysis focuses on the economic substance of the transaction; i.e. whether it was likely to produce economic benefits aside from a tax deduction. Bail Bonds, 820 F.2d at 1549. A consideration of the entire investment program directly relates to the analysis of Taxpayers probable economic benefits. It is also directly relevant to the court's assessment of Taxpayers' credibility with respect to their assertions of a non-tax based motive. The tax court acted well within its discretion in considering the evidence. 8