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Lawsuits and Interesting Specific Tax Strategy Patents - Emil Estafanous, CPA : Emil Estafanous, CPA

Lawsuits and Interesting Specific Tax Strategy Patents

Tax Strategy Patents that have been a Subject of Lawsuits

  1. SOGRAT Patent – batch choice grantor defended payments obvious
  2. Section 1031 Like-kind Exchange Tenant in Common Deedshare obvious

Information per a SOGRAT obvious lawsuit and PTO re-examination:

The primary matter for a regard of a AICPA and other taxation practitioners was a 2006 transgression fit over a “SOGRAT patent.” Awarded by a USPTO on May 20, 2003, to Robert C. Slane of Wealth Transfer Group LLC, a SOGRAT obvious describes an estate formulation technique that uses grantor defended payments trusts (GRATs) to send nonqualified batch options (NQSOs) to younger generations, with few or no present taxation consequences.1

GRATs are accessible underneath Sec. 2702 and a regulations there under. Many estate planners are informed with, and customarily use, GRATs to change a accumulation of opposite forms of resources to younger generations. Thus, it came as utterly a warn to many estate planners when an essay touting a estate taxation advantages of fixation NQSOs into a GRAT remarkable that a technique had been law by one of that article’s authors.2 This warn grew into regard when a obvious hilt instituted a above-mentioned obvious transgression fit opposite a taxpayer who implemented a technique though a permission.

1 On Jan. 6, 2006, Wealth Transfer Group LLC filed a censure in a Connecticut Federal district justice opposite John W. Rowe, alleging that he infringed a SOGRAT patent; see Wealth Transfer Group LLC v. John W. Rowe, Dkt. No. 3:06-cv-00024-AWT. Wealth Transfer Group LLC sought an explain and indemnification opposite Rowe after finding (through Securities and Exchange Commission filings) that he saved a GRAT with NQSOs. On Feb. 6, 2007, a parties filed a corner suit to stay a case, saying that they have concluded in element to solve a matter. On Mar 9, 2007, a justice authorized a trusted allotment to finish a litigation, though Rowe revelation liability. See a SOGRAT patent and a 3/9/07 agree judgement.

8 See Slane, Freeman and Simmons, “Efficient Use of Non-Qualified Stock Options as a Wealth Transfer Vehicle,” 32 Est. Pln’g 9 (September 2005).

On Jan 13, 2010, a U.S. Patent and Trademark Office (USPTO) instituted a review of a 2003 SOGRAT patent. David Kappos, executive of a USPTO, released a director-initiated sequence for reexamination of a SOGRAT patent. Patent reexaminations are authorised when before art is detected that raises a
“substantial new doubt of patentability,” though that customarily occurs when an meddlesome third celebration or a contriver creates a ask in a march of litigation. According to group statistics, usually 1 percent of reexaminations are instituted by a USPTO director.

At emanate in a reexamination is since some before art was not considered when a USPTO initial examined a obvious claim. According to a sequence for reexamination, “it is apparent . . . that an examining procession has not been followed, which has resulted in a distribution of a explain in a obvious that is prima facie unpatentable.” The sequence listed several taxation use articles about a operation of GRATs that predated a strange obvious explain hearing though weren’t deliberate by a examiner.

The reexamination sequence identifies 8 publications (in further to statements from a content of a SOGRAT patent) that lift a “substantial new doubt of patentability.”

The obvious owners and a USPTO will substantially disagree a merits of a SOGRAT obvious in perspective of these before art references according to a specific procedural sum of the 




ex parte reexamination process. During a reexamination, a SOGRAT obvious will still be in force. Claims in a obvious (that report a specific invention that a obvious owners can protect) might be added, confirmed, amended, or canceled. The routine is expected to take some-more than a year, as a recently reported median pendency of ex parte reexaminations is twenty months.



Information per a Section 1031 Like-kind Exchange Tenant in Common Deedshare obvious lawsuit:

A obvious relying heavily on Sec. 1031 has also drawn taxation advisers’ attention. The “Section 1031 deedshare patent” involves a process and investment instruments (deedshares) for behaving tax-deferred genuine estate exchanges.13 The obvious follows a outcome in Rev. Proc. 2002-22.4 Its disdainful licensee, CB Richard Ellis Investors, L.L.C., has publicized and warned that it will aggressively pursue obvious enforcement.

U.S. Patent No. 6,292,788 B1 is for “Methods and Investment Instruments for Performing Tax-Deferred Real Estate Exchanges.”  The obvious was released on Sep 18, 2001 after being filed on Dec 3, 1998 by Neal Roberts of Santa Monica, California and 3 other inventors.  The obvious is reserved to American Master Lease, L.L.C., that has postulated an disdainful permit to CB Richard Ellis Investors, L.L.C., both of Los Angeles, California.

According to a patent, mature investors enterprise investments that (1) yield a safe, solid income stream, (2) are liquid, (3) are divisible, (4) do not have to be actively managed, and (5) can be sole by their estate to compensate estate taxes.  Although investment genuine estate has problems assembly many of these desires, a vast volume of income is now invested in genuine estate.    

Selling genuine estate that has appreciated in value can outcome in serious taxation consequences.  Title 26, Section 1031 of a Internal Revenue Code permits deferral of a taxes on investment genuine estate by reinvesting in other investment genuine estate, theme to a conditions that (1) a new skill has both value and debt that are equal to or larger than a skill being sole and (2) certain time boundary are met.  According to a patent, it would be fascinating to yield an investment instrument that provides, safety, a solid income stream, divisibility, prepared liquidity, and no impasse in government of a property, while assembly a mandate of Section 1031. 

The obvious describes methods and investment instruments for investing in genuine estate regulating “deedshares.”  According to a patent, a deedshare is a new form of investment instrument that represents a tenant-in-common seductiveness in genuine estate and provides a divisibility and liquidity of a normal security, such as a bond.  A portfolio of investment genuine estate is divided into tenant-in-common deeds of fixed denominations, that are theme to a master agreement and master franchise to form deedshares.  Holders of a deedshares accept a guaranteed income tide from a master franchise and yearly depreciation, though carrying to say or conduct a genuine estate.  They are theme to a resource that enables a master reside to squeeze a deedshares during satisfactory marketplace value, or some other calculable value, during a finish of a specified term.  According to a patent, since a deedshares validate as interests in investment genuine estate, they are authorised for tax-deferred diagnosis underneath Section 1031.

There is pendind lawsuit (Fort Properties, Inc. v. American Master Lease, LLC) in a District Court in California involving a dispute between a favoured hilt of a obvious (Neil Roberts) and three individuals that Roberts recruited to start a Tenant In Common (TIC) business (and to assistance rise a patent) who after severed their attribute with Roberts and continued a business on their own.


3 The Section 1031 deedshare (patent series 6,292,788 B1) was released on Sept. 18, 2001, to Neal Roberts, Michael Franklin, Charles Runnels and James Andrews. The obvious is reserved to American Master Lease, LLC, that has postulated an disdainful permit to CB Richard Ellis Investors, L.L.C.; click here.


4 Rev. Proc. 2002-22, 2002-1 CB 733.

5 See Lederman, “Tax-Related Patents: A Novel Incentive or an Obvious Mistake?” 105 J Tax’n 325 (December 2006), during p. 327; see also “CB Richard Ellis Investors Patents $73 Million Tenancy-in-Common Structure” (9/25/03), accessible at http://netleasenews.blogspot.com/2003_09_01_archive.html, a press recover on a proclamation of CB Richard Ellis Investors’ tenancy-in-common (TIC) charity (known as a 1031FORT). Valued during $73.5 million and essentially targeting Sec. 1031 exchangers, it is one of a largest offerings of TIC genuine estate interests.

See a Section 1031 Like-kind Exchange Tenant in Common Deedshare patent
and the 1/22/09 suit for outline visualisation as partial of a lawsuit.

Other Interesting Tax Strategy Patents

Patent on Combined Sections 1031 and 1033 Exchange
Roth IRA patent
UBIT Blocker patent
CRT Patent – free residue trust – Lang patent
CRT Business Use patent – Treacy patent
CRT Business Yield patent – Treacy patent
CRT Split Income obvious – Schaub patent
Estate Disposition patent
Education Trust patent
Patent on Calculating Tax on a Foreign Entity
Patent on
Foreign Non-Qualified Deferred Compensation
Earned Income Tax Credit patent
College Savings Plan patent
Offer in Compromise patent
Multistate Analysis obvious – Lazear patent
Hedging patent

Infringement Warning Letter Info. and Request for ExamplesLang obvious – (including PGDC info. and CRT TAM and CRUT PLR , NIMCRUT info. and 1999 IRS statute info. and Press Release and Jan. 2007 Patent transgression probability letter)


About Emil Estafanous, CPA
Certified Public Accountant (CPA) Tax Professional committed in representing taxpayers and resolving their tax problems.

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