- Ag Docket
(sham partnership case; taxpayer was L.L.C. formed in connection with Chinese government-owned financial institution and a third party (as minimal investor) to acquire non-performing loans held by Chinese financial institution; U.S. investor contributes $180 million of securities to LLC and buys 90 percent of Chinese institution for $19.4 million; loans carried on LLC books at tax-loss to benefit of U.S. investor who supposedly has sufficient basis to deduct losses; Chinese institution fails to service the loans properly and IRS challenges losses claimed by U.S. investor; acquisition of loans lacked economic substance and LLC determined to be a sham; parties did not act in good faith or act with business purpose to share profits and losses; failure to force Chinese institution to service loans and Chinese institution characterized transaction as "package sale of bad debts"; U.S. investor deemed to have purchased loans directly from Chinese institution; penalties not imposed).
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