Crispin v. Comm'r of Internal Revenue, No. 12-2275 (3d Cir. 2013)Annotate this Case
Crispin worked as a CPA and as CFO of an energy company; his wholly-owned S-corporation has engaged in leasing, structured finance, aircraft acquisition, and mortgage-backed securities investing for more than 20 years. The business purchases aircraft costing $1 million to $10 million and leases them for 10 years before reselling. A Custom Adjustable Rate Debt Structure (CARDS) transaction is a tax-avoidance scheme that purports to generate large “paper” losses deductible from ordinary income. In 2000 the IRS warned against taking tax deductions based on artificial losses generated by inflated bases in certain assets. After the IRS discovered the widespread use of CARDS, before Crispin filed the contested return, the IRS issued another Notice addressed to CARDS transactions and imposed disclosure obligations on CARDS promoters and users. Crispin used a CARDS transaction, involving aircraft financing, to shelter $7 million of income for the 2001 tax year. The tax court held that he was not entitled to an ordinary loss deduction and was liable for an accuracy-related penalty (26 U.S.C. 6662), finding that the transaction lacked economic substance and that he had not relied reasonably or in good faith on the advice of an independent and qualified tax professional. The Third Circuit affirmed.
The court issued a subsequent related opinion or order on March 19, 2013.