The U.S. Court of Federal Claims has issued a ruling in a tax shelter case that could have far-reaching implications in similar cases.

The case involved Jade Trading, a limited liability corporation allegedly used by Robert Ervin and two of his brothers in 1999 to offset the income taxes due on a $40 million profit from the sale of their cable business. They each purchased a $15 million option and sold it to American International Group. They contributed the option spread to Jade Trading, claiming a tax loss of $15 million each, even though they each had only paid $150,000 for the options.

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