USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 1 of 84
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`[PUBLISH]
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`IN THE UNITED STATES COURT OF APPEALS
`
`FOR THE ELEVENTH CIRCUIT
`________________________
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`No. 20-13001
`________________________
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`Agency No. 001143-05
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`
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`1143-05
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`DAVID B. GREENBERG,
`
` Petitioner - Appellant,
`
`versus
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`COMMISSIONER OF INTERNAL REVENUE,
`
` Respondent - Appellee,
`
`__________________________________
`1335-06
`
`DAVID B. GREENBERG,
`
` Petitioner - Appellant,
`
`versus
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`COMMISSIONER OF INTERNAL REVENUE,
`
` Respondent - Appellee,
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`

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`USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 2 of 84
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`__________________________________
`20676-09
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`DAVID B. GREENBERG,
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` Petitioner - Appellant,
`
`versus
`
`COMMISSIONER OF INTERNAL REVENUE,
`
` Respondent - Appellee,
`
`_________________________________
`20677-09
`
`DAVID B. GREENBERG,
`
` Petitioner - Appellant,
`
`versus
`
`COMMISSIONER OF INTERNAL REVENUE,
`
` Respondent - Appellee,
`
`__________________________________
`20678-09
`
`DAVID B. GREENBERG,
`
` Petitioner - Appellant,
`
`versus
`
`COMMISSIONER OF INTERNAL REVENUE,
`
` Respondent - Appellee.
`
`
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`
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`2
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`

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`USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 3 of 84
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`________________________
`
`Petition for Review of a Decision of the
`U.S. Tax Court
`________________________
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`(August 20, 2021)
`
`Before NEWSOM, BRANCH, and LAGOA, Circuit Judges.
`
`LAGOA, Circuit Judge:
`
`
`
`This appeal primarily concerns the interpretation of provisions of the Tax
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`Equity and Fiscal Responsibility Act of 1982 (“TEFRA”), Pub. L. No. 97-248, 96
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`Stat. 324, in effect during the tax years at issue.1 David Greenberg appeals the Tax
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`Court’s memorandum opinion upholding adjustments contained in five notices of
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`deficiencies (“NODs”) issued by the Internal Revenue Service against him for the
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`tax years 1999, 2000, and 2001, as well as the Tax Court’s adoption of the
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`Commissioner of Internal Revenue’s computations under Tax Court Rule 155 and
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`its denial of several of Greenberg’s posttrial motions. After careful review and with
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`the benefit of oral argument, we affirm the Tax Court’s decision.
`
`I.
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`
`
`RELEVANT BACKGROUND
`
`This case concerns the appeal of five cases filed by Greenberg that were
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`consolidated by the Tax Court in Tax Court Docket Nos. 1143-05, 1335-06, 20676-
`
`
`1 The TEFRA partnership procedures relevant to this case were prospectively repealed by
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`the Bipartisan Budget Act of 2015, Pub. L. No. 114-74, § 1101(a), 129 Stat. 584, 625, effective
`for taxable years beginning on or after January 1, 2018. See Highpoint Tower Tech., Inc. v.
`Comm’r, 931 F.3d 1050, 1052 n.2 (11th Cir. 2019).
`3
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`
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`

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`USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 4 of 84
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`09, 20677-09, and 20678-09.2 At issue in this case is a type of tax shelter known as
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`“Son-of-BOSS.”3 As this Court has noted:
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`There are a number of different types of Son-of-BOSS transactions, but
`what they all have in common is the transfer of assets encumbered by
`significant liabilities to a partnership, with the goal of increasing basis
`in that partnership. The liabilities are usually obligations to buy
`securities, and typically are not completely fixed at the time of transfer.
`This may let the partnership treat the liabilities as uncertain, which may
`let the partnership ignore them in computing basis. If so, the result is
`that the partners will have a basis in the partnership so great as to
`provide for large—but not out-of-pocket—losses on their individual tax
`returns. Enormous losses are attractive to a select group of taxpayers—
`those with enormous gains.
`
`
`Highpoint Tower Tech. Inc. v. Comm’r, 931 F.3d 1050, 1052–53 (11th Cir. 2019)
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`(quoting Kligfield Holdings v. Comm’r, 128 T.C. 192, 194 (2007)).
`
`
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`Specifically, the type of Son-of-BOSS transactions involved in the instant
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`case is the Short Option Strategy (“SOS”) transaction. The Tax Court below aptly
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`explained SOS transactions as follows:
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`The SOS transaction required clients to (1) buy from a bank a foreign-
`currency option that involved both a long and a short position; (2)
`transfer the long position to a partnership, which also assumed the
`
`
`2 The Tax Court also consolidated five cases filed by William Goddard and five cases filed
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`by his former wife, Michelle Goddard, relating to the transactions at issue in this appeal. The Tax
`Court’s opinion addressed the five cases as to William Goddard, which he initially appealed to this
`Court. However, on October 8, 2020, we granted the Commissioner’s motion to transfer William
`Goddard’s appeal to the Ninth Circuit. As to Michelle Goddard, the Tax Court has yet to rule on
`her pending cases, as she is seeking innocent-spouse relief under I.R.C. § 6015 pending the
`outcome of William Goddard’s case. Thus, this appeal only concerns the five consolidated cases
`as to Greenberg.
`
`3 “BOSS” is an acronym for “bond and options sales strategy.” Kligfield Holdings v.
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`Comm’r, 128 T.C. 192, 194 (2007).
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`
`
`4
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`

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`USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 5 of 84
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`client’s obligation under the short position; and then (3) withdraw from
`the partnership and receive a liquidating distribution of foreign
`currency, which the client would sell at a loss.
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`Greenberg v. Comm’r, T.C. Memo. 2018-74, at *8 (footnote omitted).
`
`
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`Before delving into this case’s factual and procedural background, we first
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`explain the statutory framework governing the taxation of partnerships during the
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`relevant time period, given the complexity of the tax transactions before us.
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`A.
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`Statutory Overview
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`
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`“A partnership does not pay federal income taxes; instead, its taxable income
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`and losses pass through to the partners.” United States v. Woods, 571 U.S. 31, 38
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`(2013); accord I.R.C. § 701. A partnership must report its tax items for the taxable
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`year on an information return (generally, a Form 1065) and must issue to each
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`partner such information showing that partner’s distributive share of the
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`partnership’s tax items (generally, a Schedule K–1). See I.R.C. § 6031. In turn, the
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`individual partners must report their distributive shares of the partnership’s tax items
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`on their own respective income tax returns. See id. §§ 702, 704, 6222(a); Woods,
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`571 U.S. at 38.
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`
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`As noted above, during the taxable years at issue in this case, partnership
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`audits and litigation were governed by provisions of TEFRA, which were formerly
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`
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`5
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`USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 6 of 84
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`found in I.R.C. §§ 6221 through 6234.4 Before the enactment of TEFRA, the IRS
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`was unable to correct errors on a partnership’s return in a single, unified proceeding;
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`instead, tax matters pertaining to the individual partners were conducted through
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`deficiency proceedings at the individual-taxpayer level. See Highpoint, 931 F.3d at
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`1053. To address those difficulties, Congress enacted TEFRA, which created a
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`“two-step process for addressing partnership-related tax matters.” Id. As the
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`Supreme Court explained in Woods:
`
`First, the IRS must initiate proceedings at the partnership level to adjust
`“partnership items,” those relevant to the partnership as a whole.
`§§ 6221, 6231(a)(3). It must issue [a Final Partnership Administrative
`Adjustment (“FPAA”)] notifying the partners of any adjustments to
`partnership items, § 6223(a)(2), and the partners may seek judicial
`review of those adjustments, § 6226(a)–(b). Once the adjustments to
`partnership items have become final, the IRS may undertake further
`proceedings at the partner level to make any resulting “computational
`adjustments” in the tax liability of the individual partners. § 6231(a)(6).
`Most computational adjustments may be directly assessed against the
`partners, bypassing deficiency proceedings and permitting the partners
`to challenge the assessments only in post-payment refund actions.
`§ 6230(a)(1), (c). Deficiency proceedings are still required, however,
`for certain computational adjustments that are attributable to “affected
`items,” that is, items that are affected by (but are not themselves)
`partnership items. §§ 6230(a)(2)(A)(i), 6231(a)(5).
`
`
`571 U.S. at 39.
`
`
`4 Unless otherwise indicated, all Internal Revenue Code provisions and Treasury
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`Regulations cited to in this opinion refer to those in effect during the relevant time period, i.e., the
`tax years 1997 to 2001, during which time the provisions and regulations were substantially the
`same. TEFRA has since been repealed. See Bipartisan Budget Act of 2015, Pub. L. No. 114-74,
`§ 1101, 129 Stat. 584, 625.
`
`
`
`6
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`

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`Additionally, all partnerships—i.e., any partnership required to file a return
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`under § 6031(a)—were subject to the TEFRA partnership procedures, unless the
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`partnership qualified as a “small partnership.” I.R.C. § 6231(a)(1). A small
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`partnership was “any partnership having 10 or fewer partners each of whom [was]
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`an individual . . . , a C corporation, or an estate of a deceased partner.” Id.
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`§ 6231(a)(1)(B)(i). But a small partnership could elect out of the small partnership
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`exception and choose to have TEFRA apply to it for the taxable year and all
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`subsequent taxable years. Id. § 6231(a)(1)(B)(ii). As discussed below, Greenberg
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`and the Commissioner dispute whether this election could have been taken by a
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`partnership that did not qualify as a small partnership for the partnership taxable year
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`in order to have TEFRA apply should the partnership qualify as a small partnership
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`in the future.
`
`
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`Furthermore, each partnership designated a “tax matters partner” (“TMP”) to
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`act on its behalf in dealings with the IRS. See I.R.C. § 6231(a)(7). And, if the IRS
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`did issue an FPAA following a partnership audit, the TMP was permitted to
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`challenge those adjustments to the partnership items in the Tax Court. Id.
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`§§ 6223(a), (d), 6226. TEFRA also contained exceptions under which an affected
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`partner’s taxes would be determined as if he or she had personally engaged in the
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`partnership’s transactions. For example, when a partner was under criminal
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`investigation for violation of the internal revenue laws relating to income tax, the
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`
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`7
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`USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 8 of 84
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`IRS was permitted to send that partner a conversion notice informing the partner that
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`his or her partnership items for the partnership taxable shall be treated as
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`nonpartnership items. See id. §§ 6231(b)(1)(D), (c); Treas. Reg. § 301.6231(c)-5T.
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`
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`With this statutory framework in mind, we turn to the factual and procedural
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`background of the case.
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`B.
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`Factual Background5
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`
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`Greenberg is a certified public accountant who earned a degree in business
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`and finance and a master’s in accounting and who previously worked as a tax
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`accountant at accounting firms such as Arthur Andersen, KPMG, and Deloitte.
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`Greenberg met Goddard, an attorney, while working at Arthur Andersen.
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`1.
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`The Purported Transactions
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`
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`In January 1997, Greenberg and Goddard formed GG Capital, a California
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`partnership that did not have a written partnership agreement. Goddard’s law
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`partner, Raymond Lee, later became a partner at GG Capital. A Panamanian
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`investment company known as Solatium Investments Inc. (“Solatium”) was also
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`briefly a partner of GG Capital, but Solatium left the partnership by 1998. Greenberg
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`claims that GG Capital ran an active investment business in digital-option spreads
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`for both itself and its clients, i.e., a purpose completely unrelated to generating tax
`
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`5 In his initial brief, Greenberg states that he accepts and adopts the Tax Court’s factual
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`determinations. As such, much of our factual recitation comes from the Tax Court’s well-written
`opinion.
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`8
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`USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 9 of 84
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`losses, although the Tax Court did not find many facts in support of his claim.
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`Greenberg and Goddard also both assigned large amounts of their income from their
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`“day jobs” to GG Capital, with Greenberg’s assigned income coming from KPMG
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`and Deloitte. GG Capital reported, as ordinary income from Greenberg, $617,000,
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`$898,000, and $851,000 for the tax years of 1999, 2000, and 2001, respectively. The
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`Commissioner asserted to the Tax Court that this assignment of income was
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`designed to offset ordinary income with the artificial losses GG Capital planned to
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`generate.
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`
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`During 1997 and 1998, GG Capital was purportedly involved with several
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`transactions that resulted in inflating bases in various entities. According to
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`Greenberg, GG Capital, in October 1997, acquired a 20% interest in a company
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`known as DBI Acquisitions II (“DBI”) and was credited with a $4 million capital
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`account; Milestone Acquisitions, an entity controlled by a client of Goddard’s law
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`firm, controlled the other 80% of DBI. Next, Solatium borrowed 70 million Dutch
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`guilders, and GG Capital, Solatium, and Pacific Coin—a partnership that operated
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`pay phones, was one of Goddard’s clients, and was related to a company called
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`Pacific Coin Management (“PCM”)—formed a company called Connect Coin, LLC
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`(“Connect Coin”). The three Connect Coin partners allegedly made the following
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`capital contributions: (1) Pacific Coin agreed to pay fees and costs for Connect Coin
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`worth $250,000; (2) GG Capital agreed to have its partners provide legal and
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`
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`9
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`USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 10 of 84
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`accounting services to Connect Coin; and (3) Solatium contributed 9,225,000
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`guilders—which the partners agreed was the present value of 70 million guilders in
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`thirty years—with Connect Coin assuming Solatium’s previously assumed
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`obligation to make a balloon payment of 70 million guilders to Delta Lloyd Bank in
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`thirty years. Connect Coin converted the guilders into $4.5 million and lent that
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`amount to Pacific Coin.
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`As a result of Connect Coin’s assumption of the guilder debt, Solatium
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`recognized a gain and increased its basis in Connect Coin by about $35 million. The
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`parties then allegedly entered into an agency agreement under which Connect Coin
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`agreed it would act as Pacific Coin and PCM’s agent. Solatium was treated as having
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`made capital contributions to, and acquiring interests in, both PCM and Pacific Coin
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`and claimed bases of $27 million in PCM and $8 million in Pacific Coin. Solatium
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`then contributed its 1% interest in Connect Coin to GG Capital, increasing the
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`latter’s interest in Connect Coin from 4% to 5%. Greenberg and Goddard claimed
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`that this contribution gave GG Capital Solatium’s interests and carryover bases in
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`Pacific Coin and PCM. GG Capital then contributed its interest in Pacific Coin to
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`PCM, increasing its purported basis in PCM to $35 million, which was reduced by
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`a tax loss of $1 million on a Schedule K-1 that Pacific Coin issued to GG Capital.
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`In December 1998, GG Capital contributed its interest in PCM to DBI, which
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`allegedly resulted in a $34 million basis in DBI. But, as the Tax Court found, there
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`10
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`USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 11 of 84
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`are no documents in the record showing that any of these transactions actually
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`happened.
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`
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`In 1998, Greenberg and Goddard formed JPF III, a partnership that did SOS
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`transactions for GG Capital. In 1999, Greenberg became a partner at KPMG and a
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`member of Stratecon, a KPMG group that designed and sold tax shelters, including
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`the SOS transaction, to corporate clients. Greenberg was heavily involved in the
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`promotion of SOS transactions while at KPMG.
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`
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`Over the next three years, a series of transactions involving JPF III and other
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`entities occurred. On November 17, 1999, JPF III entered into an option spread with
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`Lehman Brothers, Inc., that had two “legs”: (1) a European digital call option sold
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`by Lehman to JPF III (the “long leg”), which cost $10 million and required Lehman
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`to pay JPF III $47 million if the spot rate on the yen/dollar exchange rate was greater
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`than or equal to 112.46 yen/dollar; and (2) a European digital call option sold by JPF
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`III to Lehman (the “short leg”), which cost $9.8 million and required JPF III to pay
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`Lehman $46 million if the spot rate was greater than or equal to 112.47 yen/dollar.
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`The only money that actually changed hands, however, was the $200,000 net
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`premium JPF III paid to Lehman. And both legs of the option spread expired on
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`November 16, 2000, as the highest yen/dollar exchange rate on that day was below
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`the agreed to spot rates.
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`
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`11
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`
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`The same year, JPF III bought a membership interest in AD Global Fund
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`shortly after the latter was formed in October 1999. AD Global was formed by the
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`Diversified Group, Inc., and Alpha Consultants, which were initially the only
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`members (with each contributing $50,000) and which acted as its managers. AD
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`Global was designed to look like an investment company, with its purpose being to
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`invest in foreign currencies, futures contracts, and options. However, AD Global’s
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`members used it as a vehicle to conduct SOS transactions by entering into foreign-
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`currency option spreads and contributing them to AD Global in exchange for
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`membership interest. Then, each member would claim its basis in AD Global
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`equaled the premium on the spread’s long option but would not reduce the basis by
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`its obligation on the short option, and the spreads would either expire or be closed
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`out early by Diversified. Shortly thereafter, the member would terminate or sell its
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`interest to AD Global.
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`
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`In buying the AD Global membership interest, JPF III contributed its option
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`spread with Lehman in exchange for a 33% membership interest; at the time, AD
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`Global had seven members. While the net premium of the Lehman spread was
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`$200,000, the parties only valued it at $100,000. JPF III claimed its basis in AD
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`Global equaled the value of the long-option premium it contributed but did not
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`reduce its basis for the value of the short-option liabilities assumed by AD Global.
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`One month after JPF III became a member, it withdrew from AD Global and
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`12
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`received 82,800 in Canadian dollars,6 which Greenberg converted into $57,000
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`within a week. Greenberg asserts that JPF III engaged in these transactions on behalf
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`of GG Capital, but the Tax Court found the record “murky” as, while there was an
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`agency agreement, the contribution agreement JPF III signed with AD Global stated
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`that JPF III was acting on its own. Additionally, Greenberg claimed that GG Capital
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`realized a loss at the end of 1999 by selling 49% of the spread’s long leg to him and
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`Goddard. However, as the Tax Court noted, the paper trail for this purported sale,
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`i.e., bank records and prior written consent from Lehman to transfer the 1999 option
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`spread, was nonexistent, and there was nothing other than the testimonies of
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`Greenberg and Goddard to suggest the sale actually happened.
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`
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`Similar transactions occurred in 2000 and 2001. On September 27, 2000, JPF
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`III entered into a digital option spread with Deutsche Bank, the terms of which were
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`similar to the 1999 option spread involving the yen/dollar exchange rate. The only
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`money that changed hands was the $750,000 net premium that JPF III paid to
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`Deutsche Bank. Greenberg similarly claims that JPF III bought this option spread
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`on behalf of GG Capital and that GG Capital sold 13% of the long leg to Greenberg
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`and Goddard, generating part of GG Capital’s loss for the 2000 tax year. Except for
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`Greenberg’s and Goddard’s testimony, there is no evidence in the record
`
`
`6 AD Global obtained the Canadian dollars used to buy back JPF III’s interest from a
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`Canadian dollar option spread in 1999 that ultimately expired, with AD Global receiving 147,680
`in Canadian dollars.
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`
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`13
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`demonstrating the sale occurred. On November 27, 2000, JPF III entered into
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`another digital option spread with Deutsche Bank, which was designed in a similar
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`way and had a netting provision totaling $30,000. While the taxpayers again
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`testified that this sale was on behalf of GG Capital, which resulted in generating a
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`portion of GG Capital’s loss for 2000, there is no record evidence suggesting the
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`sale occurred beyond their testimonies. And, on November 30, 2001, an entity
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`known as PTC-A entered into a digital-option spread with Deutsche Bank designed
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`in a similar way as the 1999 and 2000 option spreads. The net premium required
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`PTC-A to pay Deutsche Bank $170,000. Greenberg asserts that PTC-A bought the
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`option spread on behalf of GG Capital, with GG Capital purportedly selling the long
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`leg to Greenberg and Goddard. But, as the Tax Court again noted, there is no paper
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`trail that this occurred.
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`
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`During this time period, the federal government began investigating KPMG.
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`The investigation expanded, and Greenberg was later indicted for his role in
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`designing and marketing the SOS transaction tax shelter at KPMG. Greenberg was
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`eventually acquitted of criminal charges.
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`2.
`
`The Tax Returns
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`
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`Turning to the relevant tax returns, Greenberg prepared GG Capital’s 1997
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`partnership return and signed it on behalf of himself and the other partners—
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`Goddard, Solatium, and Lee. Attached to the return was a handwritten statement
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`
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`14
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`stating, “The Partners of [GG Capital] do hereby elect under IRC Section
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`6231(a)(1)(B)(ii) to be subject to the provisions of ‘Tefra’ as defined in the IRC.”
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`Under this statement, Greenberg signed his initials and wrote his name.
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`Additionally, the initials and names of Goddard and Lee were both written, followed
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`by the words “by David Greenberg.” And “SII”—in reference to Solatium—was
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`written followed by “Solatium Investments Foreign PTNR with Beneficial Interest
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`by David Greenberg.” At the bottom of this page, a second handwritten statement
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`provided: “The [GG Capital] partners have authorized Greenberg to sign on their
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`behalf.” At trial, Goddard testified that he authorized Greenberg to sign the
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`statement on his behalf. However, neither Lee nor a representative of Solatium
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`testified as to whether they had authorized Greenberg to sign the statement. Rather,
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`Greenberg testified that both Lee and Solatium had orally given him the authority to
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`sign on their behalf. Yet, at trial, Greenberg was unable to identify Solatium’s
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`principals; instead, he testified that he had spoken with a “guy named Tommy
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`Battilia” who claimed to have authority to act on behalf of Solatium.
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`As to the relevant 1999 tax returns, AD Global reported an ordinary loss of
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`$1.14 million related to the options contracts on its 1999 return. The K–1 addressed
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`to JPF III allocated it $334,000 of ordinary losses, $57,000 of distributions, and
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`$97,000 of capital contributions. JPF III’s 1999 return had no entries for income,
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`expenses, assets, or liabilities, but had two K–1s attached—one each for Greenberg
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`15
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`and Goddard. GG Capital’s return included the ordinary income of Greenberg,
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`Goddard, and Lee assigned from their day jobs ($617,000 from Greenberg and $1.3
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`million from Goddard and Lee). The return also reported $1.2 million in consulting
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`income, which the Commissioner asserts came from the promotion of Son-of-BOSS
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`tax shelters. GG Capital claimed a I.R.C. § 9887 loss of $2.7 million and an ordinary
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`loss from AD Global of $334,000, matching the ordinary loss reported on JPF III’s
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`K–1 from AD Global. The Commissioner asserted that those ordinary losses were
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`what Greenberg (and Goddard) used to shelter their personal income. GG Capital
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`also reported a $47,000 suspended loss from PCM. On his 1999 return, Greenberg
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`reported $710,000 of income from Deloitte and $73,000 in income from GG Capital.
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`The Deloitte income was then “reversed” in two entries titled “Reverse Deloitte.”
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`Greenberg earned about $1.2 million in 1999, but after the assignment of income
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`and the GG Capital losses, he reported only $108,000 of income on his return.
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`On its 2000 return, GG Capital again included ordinary income assigned to it
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`by the partners from their day jobs—$898,000 from Greenberg and $743,000 from
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`Goddard. It reported the same type of losses as 1999 at a greater scale—GG Capital
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`reported a $15.85 million ordinary loss it referred to as a § 988 loss and a suspended
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`loss of $3.82 million. GG Capital reported ordinary income of $823,000. Greenberg
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`
`7 Section 988 deals with the treatment of certain foreign currency transactions, including
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`options.
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`USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 17 of 84
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`again “reversed” out the income he received in 2000 from both Deloitte and KPMG.
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`Greenberg brought in about $6 million of income, but after the income assignment
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`and GG Capital’s losses, he claimed only $86,500 was taxable on his return.
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`Additionally, on its 2000 California partnership return, GG Capital claimed a $3.2
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`million loss for “DBI Acquisitions Prior Suspended Losses Allowed” (the “DBI
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`loss”), which Greenberg claims it is entitled to because GG Capital abandoned its
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`interest in DBI—after its basis was inflated through a series of convoluted
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`maneuvers—in 2000. This loss was not separately stated on GG Capital’s federal
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`return. Although Goddard testified that GG Capital claimed that loss on its return,
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`the Tax Court could not clearly find where on the return, and the Commissioner
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`asserted that Greenberg and Goddard camouflaged this loss in the § 998 loss.
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`On their 2001 returns, Greenberg reported similar assignments of income and
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`convoluted losses, and GG Capital claimed ordinary income that Greenberg and
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`Goddard claim they assigned—$854,000 from Greenberg for KPMG and $1.1
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`million from Goddard. And GG Capital reported $7.4 million of “royalties & other”
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`income, which the Commissioner asserts comes from Son-of-BOSS promotion and
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`was offset with artificial losses, as was done in prior years. GG Capital also reported
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`an “FX digital loss” of over $38 million plus a “prior suspended loss” of $600,000,
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`less a suspended loss of $29 million—netting out to about a $9 million loss, which
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`the Commissioner believes is a 2001 version of the § 988 loss previously claimed.
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`USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 18 of 84
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`GG Capital also reported a loss from a company, JPF V, LLC, of $95,000, but
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`Greenberg did not introduce any evidence about that company at trial. GG Capital
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`sent a K–1 to Greenberg that reported $103,000 in ordinary income, and Greenberg
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`did the same reversal strategy from the previous years. Including his share of GG
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`Capital’s royalties and other income, Greenberg earned about $4.5 million in 2001,
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`but with the losses from GG Capital, he reported only $61,000 in taxable income.
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`C.
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`Procedural Background
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`1.
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`The NODs
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`In October 2003, the Commissioner sent AD Global an FPAA for the 1999
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`tax year, in which he determined AD Global was a sham that was designed only to
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`reduce its members’ tax liabilities. The Commissioner disregarded the option spread
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`contributed by JPF III and concluded that JPF III (and the other AD Global
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`members) should not be treated as partners for tax purposes. And the Commissioner
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`determined that JPF III should have taken the short leg of the option spread into
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`account when calculating its basis. The Commissioner therefore disallowed $1.14
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`million of losses from the options and asserted penalties.
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`
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`Then, in 2004, the Commissioner sent Greenberg an NOD for the 2000 taxable
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`year (the “2004 NOD”), asserting a $4.7 million deficiency against Greenberg plus
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`a 40% accuracy-related penalty. The Commissioner increased Greenberg’s share of
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`GG Capital’s ordinary income by about $11 million by disallowing the DBI loss and
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`USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 19 of 84
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`the § 988 loss, reallocated the income Greenberg tried to assign GG Capital from his
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`day jobs, and allocated all of GG Capital’s “royalties & other” income back to both
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`him and Goddard. In 2005, the Commissioner sent Greenberg an NOD for the 2001
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`taxable year (the “2005 NOD”), which: (1) increased his income from GG Capital
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`by about $8.1 million; (2) disallowed the JPF V loss and the § 988 loss of $9.6
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`million claimed by GG Capital; (3) reassigned the day job income Greenberg had
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`assigned to GG Capital; (4) allocated his proportion of GG Capital’s “royalties &
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`other” income for 2001; and (5) asserted 20% accuracy-related penalties.
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`
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`In May 2008, the Commissioner sent Greenberg a letter notifying him that,
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`because he was the subject of a criminal investigation for violation of the internal
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`revenue laws relating to income tax, his partnership items with respect to AD Global
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`would be treated as nonpartnership items under § 6231(c). Then, in 2009, the
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`Commissioner sent Greenberg converted-item NODs for the 1999, 2000, and 2001
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`tax years (the “2009 NODs”). Each of the 2009 NODs shared the same reasoning:
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`AD Global was a sham formed only to lower its members’ tax liabilities, and, as a
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`result, the Commissioner disregarded AD Global, treating all transactions engaged
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`in by AD Global as engaged in directly by its purported partners. Thus, the
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`Commissioner treated the option spreads as never having been contributed to AD
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`Global and the losses purportedly realized by AD Global as realized directly by its
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`members. The 2009 NODs also provided that the purported partners of AD
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`19
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`USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 20 of 84
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`Global—i.e., JPF III—should not be treated as partners. And the 2009 NODs traced
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`the effects up to Greenberg as an indirect partner through his partnership interest in
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`JPF III.
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`
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`To summarize, the assessed deficiencies and penalties against Greenberg
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`include: (1) for the 1999 tax year, Greenberg was assessed a deficiency of
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`$1,256,000 with a I.R.C. § 6662 penalty of $502,000 in the 2009 NODs; (2) for the
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`2000 tax year, he was assessed a deficiency of $4,687,000 with a $1,875,000 penalty
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`in the 2004 NOD and a deficiency of $3,682,000 with a $1,473,000 penalty in the
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`2009 NODs; and (3) for the 2001 tax year, he was assessed a deficiency of
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`$3,336,000 with a $ 1,334,000 penalty in the 2005 NOD and a deficiency of
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`$242,000 with a $97,000 penalty in the 2009 NODs.
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`2.
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`Tax Court Proceedings
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`
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`Greenberg disagreed with the Commissioner and filed five petitions in the Tax
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`Court challenging the 2004 NOD, the 2005 NOD, and each of the 2009 NODs.
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`Following Greenberg’s acquittal of the criminal charges brought against him, these
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`cases, now consolidated, proceeded.
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`
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`Prior to trial, Greenberg filed several motions. In two motions in limine,
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`Greenberg requested that the Tax Court not consider any grounds not asserted in the
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`NODs, reject any request from the Commissioner seeking leave to amend to allege
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`additional grounds, and order that the Commissioner had the burden of proof should
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`20
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`USCA11 Case: 20-13001 Date Filed: 08/20/2021 Page: 21 of 84
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`the motion for leave to amend be granted. Greenberg also moved to dismiss the
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`cases,