Court declares Son of Boss Illegitimate

In Clearmeadow Investments LLC v. United States, ___ Fed. Cl. ___ (2009), decided 6/19/2007 [I will link to the decision when posted on website], the Court of Federal Claims (Judge Allegra) uses the parent-son metaphor to call a Son-of-Boss transaction the illegitimate child of an illegitimate father, although some might question the timing and use of the metaphor immediately before Father's Day (today). The opinion is long and very good. But, you'll get the key points from the following introduction from the decision (although I question Judge Allegra's inference that Son-of-Boss transactions present a sexy legal issue):

"When pondering sexy legal issues," one commentator recently noted, "it is doubtful that tax law crosses the minds of many." Yet, once in a while (alright, a long while), a tax dispute bursts into the mainstream. Take, for example, the legal controversy swirling around the so-called "Son of BOSS" transactions -- the quoted phrase being short for "sales option bond strategy," the legatee of the "bond and option sales" or "BOSS" strategy. While this case involves a Son of BOSS transaction, perhaps it is best to start by examining the earlier BOSS strategy -- "qualis pater talis filius," as the Romans used to say.

The BOSS strategy employed a series of transactions seemingly to increase the tax basis of an asset that would eventually be sold, supposedly at a loss. In its simplest form, it worked like this:

• Two companies are set up by a promoter -- Company A and Company B.
• Company A buys a bond with a market value of $50.
• Taxpayer X buys the bond from Company A for $1,000,050. However, Taxpayer X pays only $50 in cash, with the remainder of the purchase price taking the form of a promissory note payable by Taxpayer X to Company A for $1 million due in twenty years. Taxpayer X claims that his adjusted tax basis in the bond is $1,000,050.
• Taxpayer X then sells the bond to Company B for $50. Because Taxpayer X claims a basis in the bond of $1,000,050 and sells it for only $50, he argues that he has incurred a $1 million loss, which he promptly deducts to offset income that would otherwise be subject to tax.

In the Community Renewal Tax Relief Act of 2000 (the 2000 Renewal Act), Pub. L. No. 106554, § 309, 114 Stat. 2763A-587 to 638, Congress devitalized this strategy by modifying key provisions in the Internal Revenue Code (the Code) to prevent, in absolute terms, the increase in basis essential to generating the large loss deductions. n2 Even before the passage of the Act, however, tax planners had begun to direct their creative energies elsewhere, focusing, in particular, on the partnership provisions of the Code as a potential new engine for producing large tax losses.

Their efforts eventually led to the christening of the "Son of BOSS" strategy. Under this brainchild, the taxpayer typically would form a partnership and contribute to it an option he had purchased. The partnership would contemporaneously assume a second option that represented a liability of the taxpayer. The taxpayer would then claim that his basis in the partnership was increased by the cost of the purchased option, but not reduced by the partnership's assumption of the obligation. As in the BOSS transactions, this ultimately led the taxpayer to claim a sizable loss deduction when he sold either the partnership interest itself, or some asset whose tax basis was derivable therefrom. Though clothed in the partnership provisions of the Code, the Son of BOSS strategy shared a common aspiration with its forebear -- to generate large tax loss deductions with little in the way of capital outlays. And the Internal Revenue Service (the Service) reacted to the "son" much as it had to the "father" -- disallowing the claimed loss deductions and assessing a range of penalties.

That, in a nutshell, is what happened in the case sub judice, which is a partnership proceeding involving a Son of BOSS transaction, pending before the court on the parties' cross-motions for summary judgment. After carefully considering the parties' briefs and oral argument, the court grants defendant's motion for summary judgment and denies plaintiff's cross-motion for summary judgment. As will be described below, the court finds, as a matter of law, that the Son of BOSS transactions that led to the tax losses at issue did not, under the Code, generate the losses claimed and, at all events, lacked economic substance. It also holds that, aside from any defenses the individual partners may raise in later proceedings, the Service properly asserted the gross valuation overstatement penalty of section 6662 of the Code.

My only comment relates to Judge Allegra's "simplest form" illustration of the concept. I ask the readers to re-read the simplest form illustration. Judge Allegra describes nothing more or less than the exceedingly hokey -- and perhaps even fraudulent -- tax shelters of the late 1970s and early 1980s where all sorts of properties -- from paintings to plastic recylcing shelters -- were overvalued, purchased for the hyper-inflated values (usually with nonrecourse financing or some economic equivalent), and then purchaser-taxpayer or a flow-through entity claimed purchase price basis supported improper tax deductions. For an example of this type of earlier shelter, see Addington v. Commissioner, 205 F.3d 54 (2d. Cir. 2000).

Partner Level Adjustments without a Partnership TEFRA audit

In Muruelo v. Commissioner, 132 T.C. No. 18, here, the Court held that partnership affected items which are more properly determined at the partner level could be the subject of a notice of deficiency to the partner even without a TEFRA audit proceeding at the partnership level. The affected items that could be determined at the partnership level were (1) a partner's at risk with respect to the partnership, (2) the 704(d) limitation on partnership loss allocations to the partner's basis in his or her partnership interest, and (3) the accuracy related penalty. (Note that some courts hold that the good faith defense to the accuracy related penalty may be asserted at the partnership level in some cases, but that does not gainsay its application normally at the partner level).

The general progress of partnership tax contests starts with the partnership level audit and is thereafter followed with the partner level adjustments and further proceedings, if any, as to matters more properly determined at the partnership level. This case reminds practitioners that step 1 -- the partnership audit -- does not have to occur first.

The case is a cryptic as to why the IRS started with the partner level notice of deficiency. The tiered partnership whose activity was at issue had invested in a tax shelter that was a subject of a grand jury proceeding. Hence, I speculate, the IRS may not have wanted to move civilly via a partnership TEFRA proceeding. Alternatively, the IRS may have just recently learned of this particular shelter investment. It is clear that that partnership's and the partner's normal statutes of limitations absent fraud were about to expire when the IRS issued the notice of deficiency to the taxpayer-partner. The expiration of the partner's statute of limitation is irrelevant provided the IRS timely starts the partnership TEFRA proceeding, but the IRS had not done that here. Hence, it looks like the IRS was not certain that it would be able to prove fraud at the partnership level so as to extend the partnership level statute of limitations (thus automatically extending the partner level period for flow-through adjustments) and, rather than putting the bottom-line tax at the partner level at risk, it issued a notice of deficiency to the partner to use overlapping tools to deny the loss directly at the partner level.

Two Cases on Tax Shelter Exception to FATP-7525 Privilege

In Valero Energy Corp. v. United States, ___ F.3d ___ (7th Cir. 2009), available here, the Seventh Circuit blew the hopes of some taxpayers and professions that the tax shelter exception to the Federally Authorized Tax Practitioner ("FATP") privilege would apply only to mass-marketed, so called cookie-cutter tax shelters. Section 7525 confers the equivalent of attorney-client communications privilege for communications between a client and an FATP. SEction 7525(b)(2) excepts from the privilege "in connection with the promotion * * * in any tax shelter (as defined in section 6662(d)(2)(C)(ii))." Valero argued that the word "promotion" -- interpreted both literally and with recourse to the legislative history -- should confine the application of the exception to widely promoted tax shelters and not to one-on-one tax advice for a specific client for a special situtation. The Seventh Circuit disagreed. The opinion is straight-forward, well-written and short. I feel that would disserve the reader by trying to summarize the opinion beyond its bottom-line holding.

I will provide a short quote where the Court gives useful background and analysis for the FATP privilege that should serve as a guide for practitioners desiring to protect client communications:

We begin by noting that there is no general accountant-client privilege. United States v. Frederick, 182 F.3d 496, 500 (7th Cir. 1999). In 1998, Congress provided a limited shield of confidentiality between a federally authorized tax practitioner and her client. This privilege is no broader than the existing attorney-client privilege. It merely extends the veil of confidentiality to federally authorized tax practitioners who have long been able to practice before the IRS, see 5 U.S.C. § 500(c); 31 C.F.R. § 10.3, to the same extent communications would be privileged if they were between a taxpayer and an attorney. 26 U.S.C. § 7525(a)(1) (privilege does not apply in criminal proceedings). Nothing in the statute "suggests that these nonlawyer practitioners are entitled to privilege when they are doing other than lawyers' work. . . ." Frederick, 182 F.3d at 502; see also United States v. BDO Seidman, 337 F.3d 802, 810 (7th Cir. 2003) (BDO II). Accounting advice, even if given by an attorney, is not privileged.

This means that the success of a claim of privilege depends on whether the advice given was general accounting advice or legal advice. Admittedly, the line between a lawyer's work and that of an accountant can be blurry, especially when it involves a large corporation like Valero seeking advice from a broad-based accounting firm like Arthur Anderson. But we have set some guideposts to help distinguish between the two. For starters, the preparation of tax returns is an accounting, not a legal service, therefore information transmitted so that it might be used on a tax return is not privileged. In re Grand Jury Proceedings, 220 F.3d 568, 571 (7th Cir. 2000); Frederick, 182 F.3d at 500-01; United States v. Lawless, 709 F.2d 485, 487 (7th Cir. 1983). On the other side of the spectrum, communications about legal questions raised in litigation (or in anticipation of litigation) are privileged. In re Grand Jury Proceedings, 220 F.3d at 571; Frederick, 182 F.3d at 502. Of course, there is a grey area between these two extremes, but to the extent documents are used for both preparing tax returns and litigation, they are not protected from the government's grasp. In re Grand Jury Proceedings, 220 F.3d at 571; Frederick, 182 F.3d at 501. This circumscribed reading of the tax practitioner-client privilege is in sync with our general take on privileges, which we construe narrowly because they are in derogation of the search for truth. United States v. Evans, 113 F.3d 1457, 1461 (7th Cir. 1997).

I should also note to balance this discussion that the Tax Court recently gave a relatively taxpayer friendly application of the tax shelter exception to the FATP. In Countryside Limited Partnership v. Commissioner, 132 T.C. No. 17 (2009), here, the Tax Court held that, once the taxpayer establishes that the FATP privilege is applicable, the Government then bears the burden of showing that an exception -- there the tax shelter exception -- makes the privilege inapplicable. There, the long-time tax advisor merely responded to inquiries from the taxpayer and gave advice. The Tax Court held that the IRS had not established that these actions were a "promotion" of a tax shelter, reasoning:

Respondent has focused on Mr. Egan as "promoting the Countryside transactions." We read the conferees' statements quoted above as distinguishing tax advice given in the course of a relationship such as that between Mr. Egan and the Winn organization from the "promotion" of a client's participation in a tax shelter. There may be a point at which an FATP's actions cross the line, and will no longer be encompassed within the routine relationship between an FATP and his client and will amount to tax shelter promotion. Respondent has, however, failed to show us that Mr. Egan's communications with the Winn organization with respect to the partnership redemptions and associated transactions before us crossed that line. He rendered advice when asked for it; he counseled within his field of expertise; his tenure as an adviser to the Winn organization was long; and he retained no stake in his advice beyond his employer's right to bill hourly for his time. Respondent has failed to show us that he crossed the line from trusted adviser to promoter.

Relief from Joint and Several Liability - Two Year Rule Does Not Apply to Sec. 6015(f)

IRM 25.15.3.4.4(1) has added a note before the other note: Effective 6-8-09, until further notice, the Service will not disallow claims as being untimely under IRC § 6015(f). The Request for Innocent Spouse Relief will be reviewed based on the other factors under IRC § 6015(f). The Request for Innocent Spouse Relief under IRC § 6015(b) and IRC § 6015(c) will continue to be disallowed if not timely filed. This follows the recent Tax Court Case, Lantz V. Commissioner, 132 T.C. No. 8 (April 7, 2009). The Tax Court has ruled that the two year rule does not apply to IRC § 6015(f).

IRS Launches Tax Return Preparer Review

IRS Commissioner Doug Shulman has announced that by the end of 2009, he will propose a comprehensive set of recommendations to help the Internal Revenue Service better leverage the tax return preparer community with the twin goals of increasing taxpayer compliance and ensuring uniform and high ethical standards of conduct for tax preparers. For more see News Release IR-2009-57.

Interim Guidance On Return Preparer Penalty Procedures For Estate & Gift Preparer Penalty Cases

The IRS has issued Interim Guidance On Return Preparer Penalty Procedures For Estate & Gift Preparer Penalty Cases. The guidance advises that during every examination, estate tax attorneys should determine if further consideration of return preparer penalties is necessary. This determination will be made based on oral testimony and/or written evidence during the examination process. For more detailed information see SBSE-04-0509-009.

Materials on Offshore Account and Entity Voluntary Disclosure (Including FBARs)

Readers are reminded that the Voluntary Disclosure program for offshore accounts and entities must be implemented by September 23, 2009. Because of the time it takes to receive account documents and other information from offshore sources, persons desiring to enter the program must move promptly. For further information on the initiative, see the blogs on our sister site, the Federal Tax Crimes Blog here. This link will automatically update for blog items added in the future.

Persons having the required signatory or other authority over an offshore account anytime in 2008 must file the 2008 FBAR by 6/30/2009. For further information on this filing see here.

Tax Court Training Video

The Tax Prof Blog has posted here the links to the Tax Court's new training video series. The series is particularly useful for taxpayers representing themselves in the Tax Court (referred to in the jargon as pro se taxpayers), but some tax professionals who do not practice regularly in the Tax Court may also find the videos useful.

Xilinx & Section 482's Arm's Length Standard

On May 27, 2009, The Court of Appeals for the Ninth Circuit rendered the long-awaited opinion in Xilinx, Inc. v. Commissioner, ___ F.3d ___ (9th Cir. 2009). The Court concluded that the "arm's length" test for the application of § 482 is not the ubiquitous standard that most of us thought it was. I think the court was wrong. Let me explain.

I, like most who have played around in this field, think that the arm's length standard was always the ultimate guide and that any specific rules as to methodology in the 482 regulations were simply ways of administering the arm's length standard in specific contexts. After all, the Regulations specifically state that "the standard to be applied in every case" is the arm's length standard. § 1.482-1(a)(b)(1). Yet, the Xilinx Court held that, although the arm's length standard may be the general benchmark for valid 482 adjustments, the IRS can by regulation change that benchmark even if it achieves a demonstrably non-arm's length result.

I do not doubt that the IRS has a great deal of authority to promulgate regulations that, under Chevron (not mentioned by the majority opinion but clearly in the background), will be the law so long as reasonable even when not commanded by the plain meaning of the statute being interpreted. So, you might ask, does the statute as interpreted not require the arm's length standard? The statute itself does no mention the arm's length standard. The statute merely says that the IRS may make the adjustment when it is "necessary in order to prevent evasion of taxes or clearly to reflect the income of any of such organizations, trades, or businesses." Evasion of taxes is a term of art in the tax area, generally meaning the willful intent to violate a known legal duty applicable in order to convict under Section 7201. But, evasion as a separate concept has no discernible meaning in § 482, so the courts have focused on the "clearly reflect income" standard in the text. What does clearly reflect income mean? It too is not self defining in this context, but the overwhelming body of law, including the IRS's own regulations, says it means the income that would be reflected in a transaction between parties dealing at arm's length -- the arm's length standard.

You might ask about the legislative history. It is sparse and unhelpful given that it was enacted in 1928 with early revenue statute predicates, a time when Congress was less wordy. I cover the sparse legislative history in my earlier article John A. Townsend, Reconciling Section 482 and the Nonrecognition Provisions, 50 Tax Lawyer 701, 702-705 (1997). Until Xilinx, the arm's length standard has become the standard for resolving transfer pricing issues where it really matters -- in cross-border contexts where our treaties uniformly adopt some variation of language that is interpreted to mean that the arm's length standard applies. (The Court discusses the treaty context, and I have discussed in more detail in John A. Townsend, Tax Treaty Interpretation, 55 Tax Law. 219 (2001).)

Readers will forgive me if I digress for a moment on the arm's length standard. Back in the old (real old) days while I was with DOJ Tax Appellate I briefed and argued Liberty Loan Corp. v. United States, 498 F.2d 225 (8th Cir. 1973). In that case, the taxpayer was a parent corporation with numerous consumer finance subsidiaries. The parent-taxpayer borrowed at 5.55% and re-lent to its subsidiaries much, if not most, of the cash the subsidiaries needed to lend in their consumer finance businesses. Each of the loans to the subsidiaries was reflected in separate lending documents. The taxpayer lent its profitable subsidiaries at a 5.75% rate and its unprofitable subsidiaries at a 0% rate. These two rate structures produced overall interest income to the parent-taxpayer at its cost of borrowing rate -- 5.5%, so the parent-taxpayer had neither income or loss at its level. The parties stipulated that, had the subsidiaries borrowed from a third party unrelated lender, they would each have paid a rate exceeding 5.75%. Exercising its authority under § 482 to adjust the 0% interest rate loans to 5% (a safe harbor rate) without adjusting the 5.75% interest rate loans. The 5.75% interest rate loans were not adjusted because they were within the "safe harbor" provided in the regulations. The parent-taxpayer objected, paid the tax and sued for refund. the parent-taxpayer won at the trial level. The district court treated the subsidiaries as a group borrower who, as a group but not as individual corporations, could borrow at the 5.5% rate, thus in effect making the transaction between the parent-taxpayer and the "group" at arm's length. The Government appealed to the Eight Circuit. The Government argued, that the no-interest loans could be adjusted to the safe harbor rate because that was an adjustment toward the actual arm's length rate (exceeding 5.75%) but could not adjust the 5.75% rate downward to mitigate the effect of the first adjustment because a downward adjustment of the 5.75% rate would impermissibly move the interest rate away from the arm's length rate stipulated to exceed 5.75%. The Government won the appeal. The Court of Appeals in Liberty Loan held:

Thus, it would have been contrary to the regulations for the Commissioner to balance out the transactions at 5% (or 5.55%) when the stipulated arm's length rate was in excess of 5.75%. This limitation on the offset provision logically follows when one remembers that the purpose of a § 482 adjustment is to more clearly reflect income. The upward adjustments to the no-interest loans do just that. Downward adjustments to the 5.75% loans, however, would have the effect of moving those loans even further away from the actual arm's length rate. In adjusting the no-interest loans upwards to 5%, the Commissioner therefore made the only adjustment he could.

In Xilinx, the court did exactly what the Government argued was impermissible in Liberty Loan -- i.e. it forced the taxpayer under the guise of the regulations to move the stipulated arm's length transfer price away from the arm's length standard. It is true that the court did that under what it perceived as authority of the IRS to require § 482 adjustments by regulation under Chevron-type notions (although the court does not refer to Chevron).

I think the dissent got this right.

Predicting Appellate Results from Quantity (Not Quality) of Questions

The New York times today here has a very interesting article (here) addressing the thesis that: “The bottom line, as simple as it sounds, * * * is that the party that gets the most questions is likely to lose.” It is a short article and I recommend the reader link to it and read it in its entirety.

I decided to make a few brief comments based on my appellate experience while with the DOJ Tax Division Appellate Section in the early 1970s. My experience was before 3 judge panels that, in oral argument, functioned similarly to the way the Supreme Court works in oral argument. Hence, I observed the dynamics of oral argument and, even in some cases, understood them and applied them to my client's perceived advantage. My brief comments are:

1. To state the obvious, the quantity of questioning is not a perfect predictor (hence "likely" in an important qualifier). But quantity is more than just slightly statiscally significant (86% is quite good). Most of us would like odds that good in placing any type of bet (or just living life). See Leonard Mlodinow, The Drunkard's Walk: How Randomness Rules Our Lives (2008) and Mlodinow's recent comment on the New Times Happy Days Blog.

2. The article suggests that justices often ask questions for which they already know the answer and are just using the question and answer to convince one or more other justices. Often, it does not matter whether the responsive answer is consistent with the questioning justice's perception of the right result. Even wrong answers can be an important teaching tool, as many of us learned as we participated in the Socratic method of teaching in law school.

3. While serving as an appellate attorney, I was aware of the dynamic in a general sense. By way of background, judges who read the briefs or have been briefed by their clerks, in most cases, have an idea of what they will hold before oral argument. Their minds can be changed (and I experienced one known such significant instance), but usually they go out as they came in. This comment is directed to the odds of changing a panel's mind, and is a different, but related, issue to predictability from the quantity of questions asked.

4. My personal experience is that, across the board, counsel for the party appealing (appellant) usually get more questions than counsel for the party not appealing (appellee). Keep in mind that the party appealing has to change the status quo and given the dynamics of systemic deference to the result below (whether to the jury or to the judge) (perhaps, heaven forbid, a form of inertia), I think that the party appealing is statistically more likely to lose, wholly independent of how many questions the panel asks. (This observation is consistent with the following observation in the article that, "If the two sides receive the same number of questions, the likelihood of reversal is 64 percent, which is in line with the usual probabilities; the court reverses more often than it affirms.") But the judge's perception of need to test whether that party should really lose, perhaps drive the dynamic of a larger quantity of questions.

5. Further dynamics are at issue in tax cases. The Government wins more far more times in taxpayer appeals in tax cases than it loses. In tax cases, taxpayers do not generally exercise the same restraint that the Government does in taking appeals which must be authorized by the Solicitor General; hence, the universe of taxpayer appeals present statistically more ill-advised -- unpersuasive -- appeals than the universe of Government appeals. Focusing on the opposite circumstance -- a Government appeal -- Government appeals are generally more meritorious because, in part, they are preceded by fairly rigorous review before the Solicitor General is persuaded to even authorize the appeal. I don't know the statistic, but I would be stunned if, statistically, the Government did not win significantly more of its appeals than the taxpayers win of their appeals. But, the Government on its appeal faces the same dynamic of trying to change the status quo, and thus the Government is bound to lose a number of its appeals, regardless of the rigorousness of the internal DOJ review process. The dynamic noted previously of deference will inevitably give some tilt to Court of Appeals' results in favor of affirmance rather than reversal.

6. I now provide some anecdotal experience based on the some of the preceding observations. On some taxpayer appeals where I perceived from the dynamics of the opening appellant argument the panel understood the issues and the Government would win, my appellee argument was simply to invite questions if the panel had any but otherwise to present no argument at all when the panel had no questions. (I usually flattered or pandered the panel by saying that I perceived from the panel's questions that they understood the issues in the case (just a euphemistic way of saying I thought the Government would win).) Almost invariably, the panel asked no questions and the Government won. Sometimes I varied this approach if the dynamics of the opening argument were generally favorable but I felt that only one or two points needed clarification. I would make those one or two points (once less than 30 seconds with no panel questions after a 25 minute appellant opening argument) and sit down. I developed the strategy to do this type of limited appellee oral argument after my first case with the Government -- a taxpayer appeal to the Second Circuit. After the taxpayer's counsel used all his time, I got up with my canned argument (that I had rehearsed with a panel from the Appellate Section and went, as canned, for about 15-18 minutes), but realized within three minutes that each member of the panel was (i) not paying a lot of attention to what I said and (ii) indeed was reading something that I quickly surmised or guessed or speculated was related to the next argument. I already knew from the court's questions on the opening argument that the Government would win, so I quickly (but not abruptly) closed my argument out, covering only the major outline. Perhaps 5 minutes out of a total permitted of 30 minutes. I speculate that the panel really appreciated that I did not further occupy their and our time (but I could be wrong if the panel had anticipated having that time to further prepare for the next argument). I don't think this approach would work in the Supreme Court, although I could imagine it working if the opening argument isolated some single limited issue that was concerning the justices and then only addressing that issue (provided of court that the issue for which the Supreme Court accepted certiorari was clearly understood).

7. On Government appeals, I approached it differently. I did not perceive a bias in the quantity of questions asked. Since the Government had the burden to persuade the court to change the status quo, I felt that I wanted questions from the court. I felt that, as attorney for the Government appellant, fewer questions meant loss. Of course, the Government lost some, perhaps most of the Government appeals I argued (I really did not keep count), and in those cases, overall, I am certain that I got more questions than counsel for the appellee. And, as I now recall it, in those successful Government appeals, the taxpayer's counsel got more questions from the panel than I did. So this observation is consistent with the statistic.

8. I offer one more observation in trying to use such statistics at the Supreme Court level to extrapolate conclusions about the dynamics of Courts of Appeals. Appeals to the Courts of Appeals are of right. The Courts of Appeals must hear and decide them. Appeals to the Supreme Court through the certiorari process are not appeals of right. The Supreme Court must affirmatively decide to hear the case and determine which issues it will hear. I perceive that the Courts of Appeals now are much more stringent in determining which cases justify oral argument than they were in the days I was doing appellate work on a daily basis. This can be a process with a dynamic not dissimilar to the Supreme Court's determining which cases it will hear. Presumably, Courts of Appeals are much more likely to hear oral argument in cases which, in the review process for determining which cases will be scheduled for oral argument, are identified as involving important issues (important in their own right or involving some potential conflict with other circuits or even the own circuit) for which oral argument can be useful in understanding the bases and ramifications of whatever action the Court of Appeals ultimately takes. In this sense, the designation for oral argument in the Court of Appeals suggests some statistical correlation with the likelihood for some form of reversal or some type of revision to the result or reasoning below (i.e., if the lower court action were clearly correct, oral argument is not needed), just as the Supreme Court's acceptance of certiorari suggests a more than random statistical possibility of reversal or revision of the result or reasoning below (as noted in the article, "the [Supreme] [C]ourt reverses more often than it affirms."). The Supreme Court's rigorous selection process makes it much more likely that the Court perceive an importance in correcting errors in result or reasoning below than it just pronouncing that the lower courts got it right in result and reasoning. That dynamic in the Courts of Appeals in assigning cases for oral argument is, I suspect, much less pronounced, simply because I don't think that the selection process is nearly so rigorous. But, having said that, there might be some positive correlation that would be shown with empirical analysis.