- 62 -
On March 13, 2000, the Court of Appeals for the Ninth
Circuit affirmed the order of the Hawaii District Court that had
imposed almost $3 million in penalties against Kersting for the
promotion of abusive tax shelters. The opinion of the Court of
Appeals states:
The district court did not err in finding that
Kersting knew or had reason to know that his statements
concerning the allowability of interest were false or
fraudulent. See 26 U.S.C. � 6700(a)(2); * * *. The
record indicates that Kersting knew that his tax
shelters were sham transactions in which participants
could write off approximately twelve dollars for every
dollar of actual out-of pocket expenses. Kersting
himself indicated in a 1977 “comfort letter" to one of
the “nervous nellies” investing in his scheme that
these deductions were not legitimate - Kersting warned
the individual to “be sure this letter does not get
into the wrong hands. If IRS would become aware of the
offsetting character of your note you would likely lose
your interest deduction”.
Kersting also knew that these fraudulent interest
deductions originating in a prior version of his tax
shelter had been previously disallowed by this Court.
See Pike v. Commissioner, 78 T.C. 822 (1982) (denying
interest deductions to taxpayers participating in
Kersting’s tax shelters because the transactions
conducted by Kersting’s corporations were shams lacking
economic substance), affd., 732 F.2d 164 (9th Cir.
1984). After Pike, Kersting made merely cosmetic
changes to his tax shelter scheme. * * *
Kersting v. United States, 206 F.3d 817, 819 (9th Cir. 2000).
On March 31, 2000, this Court issued a supplemental opinion,
Dixon v. Commissioner, T.C. Memo. 2000-116 (Dixon IV), awarding
petitioners some of the attorney’s fees they sought for services
performed in the evidentiary hearing mandated by the Court of
Appeals in DuFresne and denying their motions for additional
Page: Previous 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 NextLast modified: May 25, 2011