Disguised Sale, $22 Million Tax Loss Appeal Meets Wary Judge (1)

A Second Circuit judge appeared highly skeptical during oral arguments on Tuesday of a partnership’s bid to revive its claimed $22.7 million loss for tax purposes, which the federal government said arose from an abusive shelter.

PICCIRC LLC sustained the alleged $22.7 million in loss from its 2002 sale of distressed Brazilian receivables, which the partnership claimed had a face value exceeding the amount for which they were sold. The resulting deduction flowed through to another partnership, PIMLICO LLC, but was disallowed by the IRS which said the entities manipulated partnership rules to generate the loss.

A lower court concluded ...