In two related cases, Cal. Ridge Wind Energy, LLC v. United States (Fed. Cl., 2019) and Bishop Hill Energy, LLC v. United States (Fed. Cl., 2019), the Federal Court of Claims ruled that the taxpayers were not entitled to include a multimillion-dollar Development Fee in their cost basis for a Section 1603 energy grant because the Development Fee transactions lacked economic substance.
Blue J Tax correctly predicted that the Development Fee transactions had no economic substance. It made this prediction based on several factors, including:
Although both cases discussed economic substance as part of the sham transaction doctrine analysis, the court applied the common law test instead of the statutory economic substance test set out in § 7701(o) of the Internal Revenue Code. Nonetheless, Blue J Tax was still able to predict that the transactions had no economic substance, due to the platform’s multi-factorial approach.
Download our report to see a breakdown and report of how Blue J Tax predicted this case.
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