DAD Tax Shelter Invalidated By Tax Court

The U.S. Tax Court, in Superior Trading, LLC, et. al. v. Commissioner, 137 T.C. No. 6, held that a purported partnership in Brazilian consumer receivables allegedly contributed by the original holder with high basis, built in losses, was not a true tax partnership and denied the investor partner's ability to claim losses with respect to those assets.  The Tax Court found that the two purported partners did not share a common purpose of managing and collecting the receivables for profit, but the purported contributing partner had no interest in continuing with the activity, and that it's purported redemption within a year of the purported partnership's formation was subject to step transaction analysis.  This case is the Tax Court's first repudiation of the DAD tax shelter.  Penalties were also imposed in the case.