- 19 -
In Clapp v. Commissioner, supra, the individual taxpayers
transferred their businesses to foreign trusts. The Commissioner
issued notices to both the individuals and the trusts; the
notices attributed many of the same items of income to both
parties. The notices also disallowed numerous deductions as
unsubstantiated, including all business expenses claimed by the
individuals and the trusts.
The taxpayers in Clapp challenged the validity of the
notices, stressing the Commissioner’s alternative positions and
the blanket disallowance of deductions. In response, the Court
of Appeals for the Ninth Circuit observed that the Commissioner’s
alternative notices were intended to ensure that the Commissioner
would be able to proceed whether or not the trusts were found to
be shams. The Court of Appeals stated that taking such
alternative positions:
seems to be a reasonable response to a tax evasion
scheme for which there is not as yet a settled legal
interpretation. Any other approach would reward the
tax evader who could come up with a novel scheme and
force the Commissioner to take a single, consistent
legal interpretation. * * * On previous occasions we
have upheld notices of deficiency which took
alternative positions for precisely this reason. Malat
v. Commissioner, 302 F.2d 700, 704 (9th Cir. 1962);
Revell, Inc. v. Riddell, 273 F.2d 649, 660 (9th Cir.
1960). [Clapp v. Commissioner, supra at 1401; fn. ref.
omitted.]
The statutory notices sent to petitioner, Ms. Ghavami, and
Universal, like the notices in Clapp v. Commissioner, supra, were
Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NextLast modified: May 25, 2011