United States' Motion to Exclude Expert Testimony of Plaintiffs'

which provide a general defense against all of the penalties asserted in this case.2Under this rule, penalties are reduced to the extent the underpayment of tax is due toreasonable cause and good faith. The reasonable cause requirement can be met throughreliance on professional advice that meets three requirements: (1) it must be based on allfacts and circumstances including the purposes for entering into the transaction andstructuring the transaction in a particular manner; (2) the advice must not containunreasonable assumptions, including assumptions which the taxpayer knows or hasreason to know are unlikely to be true, and (3) the advisor cannot lack knowledge of therelevant aspects of Federal tax law.4 Substantial Valuation MisstatementThe substantial valuation misstatement rules are subject to the same section 6664defenses as the gross valuation misstatement rules and, therefore, for purposes of thisopinion, are the same.B. Factual BackgroundI am relying on the following facts in rendering my opinion.1. The description of the transaction in the Opinion is consistent with the actualtransaction, and any differences in actual execution were immaterial to thetax consequences.2. The representations in the Opinion are true. In particular, Representation 2(which states that the primary purpose for creating BPB was to act as thevehicle for the potential tender offer of Solution 6), Representation 8(regarding the need to reduce currency exposure in connection with thetender offer), and Representation 9 (which states that there was a reasonable2 There is a split of authority on whether the section 6664 defense can be asserted in partnership-levelproceedings like the case here or whether they must be asserted in a separate partner-level action.Notably, a court in the Eastern District of Texas, where this case is being litigated, has held that the issuecan be considered in a partnership-level proceeding. Klamath Strategic Investment Fund v. United State, 440F. Supp. 2d 608 (ED. Tex. 2006), appeal pending. I wil opine on whether the relevant section 6664standards are met without taking a position on the legal issue of whether the defenses can be asserted inthis proceeding or must be asserted in a separate partner-level action.6