On November 26, 2024, the First Department issued a decision in Xiaoyan Lu v. Sagewood SFF III LLC, 2024 NY Slip Op. 05895, holding that a plaintiff was entitled to judgment based on tax estoppel, explaining:
Plaintiffs also established entitlement to judgment based on tax estoppel. Defendants represented to the Internal Revenue Services that plaintiffs were members in Fund III by attaching their K-1s to a signed tax return. Defendants’ explanation for filing false K-1s — that there was never any money contributed by or on behalf of plaintiffs into Fund III — is meritless and unreasonable, as defendants, who controlled Fund III, were aware of the facts when they made the false filings.
(Internal citations omitted).