Don Korb Comments on Sala Reversal in Daily Tax Report and Tax Notes Today

July 26-27, 2010

Mr. Korb was featured in the July 26 Daily Tax Report article,“10th Circuit Overturns ‘Sala,’ Finds Tax Shelter Lacked Economic Substance,” and the July 27 issue Tax Notes Today article, “Sala Reversal Gives Government Another Win on Economic Substance.” The articles discuss the overturn by the U.S. Court of Appeals for the 10th Circuit of the ruling in favor of taxpayer Carlos Sala. Sala was charged for fraud by avoiding federal tax on income from stock options through the use of a Son-of-Boss tax shelter. On appeal, the government found that the Son-of-Boss lacked economic substance, and on July 23, the 10th Circuit remanded the case to the district court reversing its grant of a $24 million refund and judged in favor of the government. Tax Notes Today observed that “the outcome appeared to vindicate a prediction by Mr. Korb, then IRS Chief Counsel, who said after the initial Sala decision in 2008 that the ruling would prove to be merely a bump in the road for the government.” He said at the time, “I think Sala is clearly an aberration, [and] when history is finally written, it will come out quite differently.” Mr. Korb noted in the Daily Tax Report that the case was the only one of its kind where the government did not initially win, adding the Sala decision may be “the final nail in the coffin” for Son-of-Boss transactions.