United States Court of Appeals for the Federal Circuit ______________________ BASR PARTNERSHIP, WILLIAM F. PETTINATI, SR., TAX MATTERS PARTNER, Plaintiffs-Appellees v. UNITED STATES, Defendant-Appellant ______________________ 2017-1925 ______________________ Appeal from the United States Court of Federal Claims in No. 1:10-cv-00244-SGB, Judge Susan G. Braden. ______________________ Decided: February 8, 2019 ______________________ THOMAS A. CULLINAN, Eversheds Sutherland (US) LLP, Atlanta, GA, argued for plaintiffs-appellees. Repre- sented by REBECCA M. STORK. MICHAEL J. HAUNGS, Tax Division, United States De- partment of Justice, Washington, DC, argued for defend- ant-appellant. Also represented by JACOB EARL CHRISTENSEN, DAVID A. HUBBERT, GILBERT STEVEN ROTHENBERG. 2 BASR PARTNERSHIP v. UNITED STATES CARLTON M. SMITH, New York, NY, for amici curiae Harvard Federal Tax Clinic, Philip C. Cook Low-Income Tax Clinic of Georgia State University. ______________________ Before PROST, Chief Judge, WALLACH and CHEN, Circuit Judges. Opinion for the court filed by Chief Judge PROST. Dissenting opinion filed by Circuit Judge WALLACH. PROST, Chief Judge. This appeal concerns an order from the U.S. Court of Federal Claims awarding $314,710.69 to BASR Partner- ship (“BASR”) under 26 U.S.C. § 7430 (“I.R.C. § 7430”) for its reasonable litigation costs incurred in connection with a tax determination from a Tax Equity and Fiscal Respon- sibility Act of 1982 (“TEFRA”) proceeding. The United States (“Government”) appeals the order. We have juris- diction pursuant to 28 U.S.C. § 1295(a)(3). We affirm. I The Pettinati family owned a commercial printing com- pany, Page Printing, from 1982 until they sold it in 1999. Before completing the sale, the Pettinatis hired the now- defunct law firm of Jenkens & Gilchrist to advise them on an investment strategy that potentially had tax benefits arising from the sale of their business. See BASR P’ship v. United States, 795 F.3d 1338, 1340 (Fed. Cir. 2015); J.A. 133, 987. As part of the “tax planning strategy by attorney Erwin Mayer of Jenkens & Gilcrest [sic], P.C.,” J.A. 1071, the Pettinatis formed BASR, a general partnership, J.A. 1071, 2392–402. BASR assumed certain U.S. Treasury Note obligations, which increased its cost basis. J.A. 54. Further, each of the BASR partners—William Pettinati, Sr., his wife, Virginia Pettinati, and the gift trusts belong- ing to their two sons, William Pettinati, Jr. and Andrew Pettinati—contributed all their shares in Page Printing to BASR PARTNERSHIP v. UNITED STATES 3 BASR in June 1999. J.A. 55, 82. Two months later, BASR sold 100% of its stock in Page Printing to Nationwide Graphics, Inc. for $6,898,245. J.A. 55. When offset against its overstated cost basis, however, BASR realized a gain of only $263,934. Id. On their 1999 individual returns, the Pettinati partners reported their shares of this under- stated gain passed through to them from BASR. J.A. 1231, 1266, 1280. In other words, “by creating the BASR Part- nership, the Pettinatis greatly reduced the tax liability arising from the sale of their printing business.” BASR P’ship, 795 F.3d at 1340. The Internal Revenue Service (“IRS”) did not confront the Pettinatis regarding the overstated basis until a decade later. In January 2010, ...
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