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Legal Ethics

Tax Court Finds Shelters Promoted by Former Seyfarth Lawyer Are Invalid

Posted Sep 2, 2011 3:54 PM CDT
By Rachel M. Zahorsky

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The U.S. Tax Court ruled Thursday that the tax benefit transactions touted to clients by Chicago-based lawyer John Rogers are invalid.

Rogers was sued by the U.S. Justice Department last year to prevent him from promoting the deals, dubbed Distressed Asset Debt and Distressed Asset Trust tax shelters by the government. They involved Brazilian consumer debt and featured transactions among U.S. taxpayers and a company in the British Virgin Islands, Bloomberg reports. When they first sued Rogers a year ago, the government estimated that Rogers had generated more than $370 million in improper tax deductions for more than 100 clients. That case is still pending in federal court in Chicago.

“There has been no showing of reasonable cause or good faith on Rogers’ part in conceptualizing, designing and executing the transactions,” Judge Robert A. Wherry wrote in this week’s tax court’s decision. “Instead, Rogers’ knowledge and experience should have put him on notice that the tax benefits sought by the form of the transactions would not be forthcoming and that these transactions would be re-characterized and stepped together to reveal their true substance.”

Rogers was a partner at Seyfarth Shaw until 2008, when the firm required him to resign because he continued to promote the tax shelters, Bloomberg reports.

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