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John Paul Reddam, one of the owners of the Del Mar Thoroughbred Club, lost an appeal from the U.S. Tax Court on Friday (June 13).

According to the Metropolitan News-Enterprise, a Los Angeles publication specializing in legal matters, the Ninth Circuit appeals court ruled that the Internal Revenue Service and the Tax Court were correct in disallowing more than $50 million in tax losses Reddam had claimed by using the "offshore portfolio investment strategy," or OPIS, cooked up by the big accounting firm KPMG.

Reddam used Cayman Islands–based shell corporations to offset a big gain on the sale of an Orange County company. The Tax Court found that Reddam was generating artificial losses. Back in 2002, a number of rich people were using the KPMG tax gimmick, including former U.S. Treasury secretary William E. Simon Sr. In 2003, the Internal Revenue Service offered a settlement in which the participants would give up 80 percent of their gains from the offshore tax strategy. According to the News-Enterprise, 92 percent who bought the shelter took up the government's offer — but not Reddam.

"On KPMG's advice, Reddam formed the J. Paul Reddam Trust to implement the OPIS transaction," said the appeals court. "Much of the transaction was carried out in euros." The strategy involved buying stock in foreign banks with money borrowed from the same banks. The Tax Court judge said Reddam "knew he was purchasing a tax loss rather than entering into a legitimate investment."

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