 United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT



Argued October 23, 2019           Decided November 26, 2019

                        No. 18-1275

  ENDEAVOR PARTNERS FUND, LLC AND DELTA CURRENCY
        TRADING, LLC, TAX MATTERS PARTNER,
                    APPELLANTS

                             v.

           COMMISSIONER OF INTERNAL REVENUE,
                       APPELLEE


       Consolidated with 18-1276, 18-1277, 18-1278


               On Appeal from the Decisions
               of the United States Tax Court


       Adrienne B. Koch argued the cause for appellants. With
her on the briefs were David L. Katsky, Elias M. Zuckerman,
and Haley E. Adams.

        Francesca Ugolini, Attorney, U.S. Department of
Justice, argued the cause for appellee. With her on the brief
was Judith A. Hagley, Attorney.

   Before: ROGERS and GRIFFITH, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
                                2

   Opinion for the Court filed by Senior Circuit Judge
WILLIAMS.

    Concurring opinion filed by Circuit Judge ROGERS.

     WILLIAMS, Senior Circuit Judge: Andrew Beer was in the
tax shelter business. His enterprise (referred to by the parties
as “the Delta Group” or “Bricolage”) sold customers the chance
to claim large, artificial losses to offset their income and reduce
their taxes. Partnerships controlled by Beer bought pairs of
currency option trades from Deutsche Bank. Each option trade
within the pair amounted to a bet on whether a target currency
would appreciate or depreciate within a week. Together, the
two options in each pair yielded a net gain or loss of zero.

    Whichever trade won generated a large gain for a
partnership in one year; the losing trade created a
corresponding loss in a subsequent year. Partnerships enjoy
pass through status, meaning that partners (not the partnership)
are liable for the organization’s taxes and enjoy any tax
benefits. See 26 U.S.C. § 701. In this case, an accommodating
party absorbed the partnerships’ gains, while Beer’s customers
took advantage of the losses. See Endeavor Partners Fund,
LLC v. Comm’r, 115 T.C.M. (CCH) 1540, 2018 WL 3203127,
at *4 (T.C. 2018) (describing rules “allegedly” enabling the
accommodating party to “defease” the gains).

     This case involves three sets of trades in November and
December, 2001, generating $144 million in losses a year later.
See id. at *14. By the fall of 2002, the government had gotten
wise to this type of tax shelter and scared off Beer’s customers,
see Endeavor Partners Fund, LLC, 2018 WL 3203127, at *14;
J.A. 2184, and accordingly Beer used the losses for himself,
though he evidently needed only $40 million of the total. See
J.A. 2185.
                               3

     The Tax Court found that these transactions lacked
economic substance—that they were shams designed to look
like real world trades without any of the risk or concomitant
opportunity for profit.

     Though the option trades nominally cost tens of millions
of dollars each, Deutsche Bank financed almost all the scheme
on credit. According to the Tax Court’s findings, the parties
structured the transactions to guarantee that, regardless of
which trade “won,” the options always paid an amount exactly
equal to the costs of the Deutsche Bank loan. One half of an
option pair paid out in Danish kroner, while the other paid out
in euros.

     These two currencies are functionally the same; the former
was then, and is now, “pegged” to the latter. But currency
markets are not perfectly efficient and, apparently, the
currencies did not move identically on the open market. To
avoid any residual risk that the krone and the euro might
fluctuate relative to one another, the Tax Court found, Deutsche
Bank and the partnerships agreed in advance to use seven-day
forward exchange rates to convert the euro or krone winnings
into the currency necessary to pay off the Deutsche Bank loan.
See Endeavor Partners Fund, LLC, 2018 WL 3203127, at *8,
*10, *12, *19. This meant that the trades posed zero risk: No
matter which option trade won, the partnerships knew they
would receive exactly enough money to pay off the Deutsche
Bank loans.

    On appeal, the partnerships primarily contest the Tax
Court’s conclusion that the parties agreed in advance on the
exact rates to be used in determining earnings and losses under
the option agreements, together with a related evidentiary
point. Because the Tax Court did not clearly err in that
conclusion—or in any other material respect—we affirm.
                                4

                              ***

     On a variety of grounds Congress allows taxpayers the
benefit of various deductions, exclusions, and credits. See, e.g.,
26 U.S.C. § 165 (permitting taxpayers to deduct losses). These
provisions tempt some taxpayers into engaging in transactions
that appear to follow the letter of the law but lack any real
economic substance.

     We review the Tax Court’s conclusions that the paired
currency option trades amount to shams “in the same manner
and to the same extent as decisions of the district courts in civil
actions tried without a jury.” 26 U.S.C. § 7482(a)(1). This
means we examine legal conclusions de novo and factual
determinations for clear error. See Green Gas Del. Statutory
Tr. v. Comm’r, 903 F.3d 138, 142 (D.C. Cir. 2018). We may
overturn the Tax Court’s fact findings only if we come to a
“definite and firm conviction that a mistake has been
committed.” United States v. U.S. Gypsum Co., 333 U.S. 364,
395 (1948).

     The Tax Court relied for legal principles on our decision
in Horn v. Commissioner, 968 F.2d 1229 (D.C. Cir. 1992),
requiring that to treat a transaction as a sham the IRS must show
that it possessed neither (1) any objectively reasonable
potential for profit nor (2) any “other legitimate nontax
business purposes,” id. at 1238; see also id. (identifying “risk
allocation” as one such alternative nontax business purpose);
Endeavor Partners Fund, LLC, 2018 WL 3203127, at *17–18
(relying on Horn). Looking beyond this case, we note that
Congress established its own test in a 2010 amendment to the
Internal Revenue Code, see 26 U.S.C. § 7701(o); Health Care
and Education Reconciliation Act of 2010, Pub. L. No. 111-
152, § 1409, 124 Stat. 1029, 1068–69 (2010), to be applied
prospectively only, see id. at 1070.
                                5

     The partnerships argue that the Commissioner bore the
burden of proof at trial. But the Tax Court correctly ruled that
“the allocation of the burden of proof in these cases is
immaterial” because the governing standard was the
preponderance of the evidence. Endeavor Partners Fund, LLC,
2018 WL 3203127, at *17; see Blodgett v. Comm’r, 394 F.3d
1030, 1039 (8th Cir. 2005). Under a preponderance standard,
once both parties have produced their respective evidence, the
side with the more persuasive case prevails. See Blodgett, 394
F.3d at 1039. As a result, the parties sensibly focus on the facts:
if the Tax Court’s factual findings were free of reversible error,
the judgment of sham transaction is inevitable.

     The Tax Court did not clearly err when it concluded the
parties fixed the forward exchange rates, ensuring that they
could predict the precise amount that the winning and losing
trades would pay—and ensuring that the trades had no ex ante
profit potential and lacked any “other legitimate nontax
business purposes,” Horn, 968 F.2d at 1238. The court relied
primarily on three items of evidence.

     First, it found that the partnerships and Deutsche Bank
“exchanged spreadsheets” that included the mutually agreed
rate “for converting kroner to euro” and “kroner and euro into
dollars.” Endeavor Partners Fund, LLC, 2018 WL 3203127,
at *9, *10, *12.

     Second, when Deutsche Bank closed the three 2001 trades,
it did not use the prevailing market exchange rates. See
Appellant Br. 47 (admitting that “Deutsche Bank may not have
used any of the actual spot rates in effect on the settlement
dates”). Instead, Deutsche Bank settled the trades using the
same rates listed in the spreadsheets they exchanged.

    Third, not once did the partnerships object to the use of the
fixed exchange rate instead of the prevailing market spot rate.
                                6

See Endeavor Partners Fund, LLC, 2018 WL 3203127, at *19.
The Delta Group’s contemporary silence about Deutsche
Bank’s use of a pre-agreed exchange rate strongly indicates that
the parties agreed to fix the krone-euro rate for purposes of
determining option outcomes, eliminating whatever risk (and
potential for profit) might have otherwise existed. And at least
two other similar sets of trades in which Beer’s affiliates
engaged in 2000 also recorded no profit or loss. See id. at *6–
8; J.A. 1999, 2358, 2634.

     The partnerships attack the court’s finding of an agreement
on rate-fixing, pointing to the testimony of Andrew Beer, the
man behind the whole scheme. Beer had offered an innocent
explanation of the Deutsche Bank spreadsheets, saying that
they didn’t represent an agreed forward exchange rate with
which to settle the trades, but rather a projection “to ensure that
the trades were priced in such a way that any profit or loss
would result from [a] change [in the market] and not from an
error in pricing in the first instance.” See Appellant Br. 18
(paraphrasing Beer’s testimony at J.A. 2173–74). We’re far
from confident we understand what Beer meant to convey. But
the account, if believed, would support an inference that
Deutsche Bank’s use of the forward exchange rate to settle the
trades, rather than the spot rate, was pure accident and a
deviation from the parties’ plans. See Endeavor Partners
Fund, LLC, 2018 WL 3203127, at *19.

     But the Tax Court did not credit Beer’s testimony. Id.; see
106 Ltd. v. Comm’r, 684 F.3d 84, 92 (D.C. Cir. 2012) (noting
that the Tax Court’s “credibility determinations are entitled to
the greatest deference” (quotation and citation omitted)).
Indeed, it pointed to a highly implausible assumption
underlying Beer’s account: “Mr. Beer’s testimony presupposes
that Deutsche Bank erred in this way, not once, but every time
it closed a Delta options trade.” Endeavor Partners Fund,
LLC, 2018 WL 3203127, at *19.
                               7

     This leads us to the partnerships’ claim of a faulty
evidentiary ruling. The Tax Court went on to note that the
partnerships did not call “the most logical witness to testify
about Deutsche Bank’s trading practices,” namely someone
“from Deutsche Bank.” Id. The court observed “from this we
infer that such testimony would not have been helpful to them.”
Id. As the partnerships see it, the court thus drew an
impermissible adverse inference from the absence of a
Deutsche Bank witness. And—they argue—this error is fatal,
because the court needed that inference to reach the conclusion
that the parties rigged the rates.

     But studying the court’s analysis, we conclude that any
error was harmless.

     Under the common law formulation, a fact finder
(typically, a jury) may but need not draw an adverse inference
from the absence of a witness “if a party has it [1] peculiarly
within his power to produce witnesses whose testimony would
[2] elucidate the transaction.” United States v. Young, 463 F.2d
934, 939 (D.C. Cir. 1972) (quoting Graves v. United States, 150
U.S. 118, 121 (1893)).

     The likely Deutsche Bank witnesses clearly had the
potential to “elucidate the transaction”—they could directly
address the question whether the rate-rigging had been
intentional or accidental. Id. So the pertinent questions are
whether the witnesses were “peculiarly within [the
partnership’s] power” and, if not, whether the Tax Court’s
conclusion rested materially on the adverse inference.

    On the facts of this case, neither the partnerships nor the
Commissioner peculiarly controlled Deutsche Bank’s
employees. The partnerships’ business relationship with
Deutsche Bank had long since withered, and the government’s
non-prosecution agreement with the Bank did not, by itself,
                               8

place its employees within the government’s power. See
United States v. Tarantino, 846 F.2d 1384, 1404 (D.C. Cir.
1988) (“[N]o automatic inference of exclusive government
control arises from the fact that witnesses are acting as
government informants, or from a grant of immunity from
prosecution.” (citations omitted) (emphasis added)). But see
Burgess v. United States, 440 F.2d 226, 232 (D.C. Cir. 1970)
(concluding that “[t]he testimony showed a relationship
between the Government and the informer which placed it
peculiarly within the power of the Government to produce
him”); United States v. Williams, 113 F.3d 243, 246 n.2 (D.C.
Cir. 1997) (construing Burgess as “alleviat[ing] the need for the
defense to seek a witness by subpoena” to secure a missing-
witness instruction).

      Some courts have relaxed the common law standard and
dropped the requirement that the party against whom an
inference is drawn have the witness “peculiarly within his
power,” thus giving the fact finder fairly broad discretion to
draw an inference and to choose the party against whom it is to
be drawn. See, e.g., Wilson v. Merrell Dow Pharm. Inc., 893
F.2d 1149, 1152 (10th Cir. 1990) (“When an absent witness is
equally available to both parties, either party is open to the
inference that the missing testimony would have been adverse
to it.”); United States v. Erb, 543 F.2d 438, 444 (2d Cir. 1976)
(“[T]he weight of authority in this circuit and the more logical
view is that the failure to produce (a witness equally available
to both sides) is open to an inference against both parties.”
(quotation and citations omitted)); United States v. Cotter, 60
F.2d 689, 692 (2d Cir. 1932) (Hand, J.) (“When both sides fail
to call a witness who knows something of the facts, their
conduct, like anything else they do, is a circumstance which a
jury may use.”); State v. Greer, 922 N.W.2d 312, ¶¶ 18–19
(Wis. Ct. App. 2018) (unpublished).
                                9

     We have given conflicting signals about whether control
over a missing witness is required for a fact finder to draw an
inference. Compare Young, 463 F.2d at 943 (“But in the in-
between case where each side has the physical capacity to
locate and produce the witness, and it is debatable which side
might more naturally have been expected to call the witness,
there may be latitude for the judge to leave the matter to debate
without an instruction, simply permitting each counsel to argue
to the jury concerning the ‘natural’ inference of fact to be
drawn.”), with United States v. Norris, 873 F.2d 1519, 1522
(D.C. Cir. 1989) (“Exclusivity or peculiarity of power to
produce is [] one of two necessary predicates for entitlement to
the missing witness instruction.” (emphasis added)).

     In at least one case involving an agency, we have reversed
the National Labor Relations Board when it applied the adverse
inference against a party that did not control the witness. Bufco
Corp. v. NLRB, 147 F.3d 964, 971 (D.C. Cir. 1998). In the
course of our (brief) analysis, we also noted that the Board’s
decision conflicted with its own precedent on the subject. Id.

      This multiplicity of viewpoints suggests the possibility
that we should, in reviewing agency decisions, adopt a rule that
saves agencies from undue risk of reversal due to their potential
failure to estimate correctly what circuit will review a particular
decision. Besides reducing the risk of inadvertent error, such a
rule would prevent agencies from having to adopt different
evidentiary rules depending on the circuit (or, indeed, multiple
circuits) in which an appeal may lie. At least where good
arguments exist for and against permitting the inference, we
might allow an agency leeway to choose its own path.

     Though lodged under Article I, the Tax Court is—in one
relevant respect—unusual: Congress has specifically directed
us to review that court in the “same manner and to the same
extent as decisions of the district courts in civil actions tried
                                 10

without a jury.” 26 U.S.C. § 7482(a)(1). This indicates that,
even if we were to adopt the rule discussed above generally, we
would still have to apply our circuit’s case law to Tax Court
decisions rather than Tax Court precedent. See generally Dang
v. Comm’r, 83 T.C.M. (CCH) 1627, 2002 WL 977368, at *3
(T.C. 2002) (concluding, in an unpublished, non-binding
memorandum opinion, that “no adverse inference is warranted”
if “a witness is equally available to both parties”).

     In the end, however, we need not resolve the permissibility
of the inference nor the governing source of law on that issue.
The error, if any, was harmless. See Young, 463 F.2d at 940
(applying harmless error analysis). No reader of the Tax
Court’s analysis of Beer’s testimony in the full context of the
documentary evidence can seriously doubt that its observation
about the lack of Deutsche Bank witnesses was only a matter
of gilding the lily. Cf. William Shakespeare, King John, act 4,
sc. 2 (“To gild refined gold, to paint the lily . . . Is wasteful and
ridiculous excess.”). Indeed, examining the record we do not
believe any reasonable fact finder would have needed to rely
on an adverse inference to tip the scales in the Commissioner’s
favor. The court had before it a pattern of trades that occurred
on at least five different dates (the three in late 2001 at issue in
this appeal and two others in 2000). On all five occasions, the
partnerships turned not a smidgeon of profit or loss. See J.A.
1999, 2358, 2634. And by Beer’s admission the Delta Group
never objected to Deutsche Bank’s failure to use the market
spot rates to close the trades in 2001. See J.A. 2579–80 (stating
surprise at learning that the trades did not use the spot rates).
Given this sustained pattern of repeated, zero-profit-or-loss
transactions, the Tax Court had—and asserted—ample reason
to conclude that Beer and Deutsche Bank arranged their scheme
to eliminate all risk. Indeed, the pattern evidence was the thrust
of the Tax Court’s analysis. See Endeavor Partners Fund,
LLC, 2018 WL 3203127, at *19. As the evidence appeared to
the court to tilt overwhelmingly in favor of the Commissioner,
                              11

the partnerships’ failure to dig themselves out of the hole by
calling Deutsche Bank witnesses must naturally have suggested
that the partnerships saw no prospect of help in that quarter.
But it also rendered the allusion to these witnesses (and any
possible error) harmless.

     The partnerships contend the pattern of no-profit-or-loss
trades cannot provide evidence of an agreement to rig the rates
“unless (at a minimum) it could not be explained by anything
else.” Appellant Br. 47. Not so. Under a preponderance
standard, what matters is that the Tax Court could reasonably
find that rate rigging (rather than Beer’s account) was the more
probable explanation for the highly suspicious pattern, not that
it was irrefutable. None of the cases to which the partnerships
cite, see id. at n.25, demands that we overturn the Tax Court’s
sensible conclusion. See, e.g., Smith v. Reitman, 389 F.2d 303,
304 (D.C. Cir. 1967) (concluding that there must be “some
basis in the record or in common experience to warrant” an
inference based on res ipsa loquitur (emphasis added)
(quotation and citation omitted)).

     Finally, the partnerships argue that their trades possessed
an independent business purpose, aside from offsetting taxes:
Before the Commissioner started cracking down on the
practice, the Delta Group had planned to profit from the tax
losses by transactions in its tax shelter business. (Ultimately,
instead of selling the losses, Beer used them for himself when
he ran out of customers.) This seems a splendid new example
of chutzpah. The business purpose test looks to whether a
transaction has any purpose independent of the resulting tax
savings. If profits from marketing tax losses could be viewed
as “independent,” the sham transaction rule would apply only
to unsophisticated creators of sham transactions (a small group,
we suspect).

                            * * *
                        12

The judgment of the Tax Court is

                                   Affirmed.
    ROGERS, Circuit Judge, concurring: I write only to
elaborate on how a finding that there was an agreement on the
exchange rates eliminated the profit potential of the trades.

     As the court explains, one option in a pair would pay out
in kroner and the other would pay out in euros. Op. at 3.
Equally important, however, is that the premium loan for the
option that paid out kroner needed to be repaid in kroner, and
the premium loan for the option that paid out in euros needed
to be repaid in euros. The fact that the premium loans needed
to be repaid in different currencies explains why the rate
agreement eliminated any profit potential. Putting aside the
negligible payout from the losing option, the partnerships
needed to use the payout from the winning option to pay the
premium loans for both the winning option and the losing
option. Because the two options’ premium loans had to be
repaid in different currencies, the partnerships needed to make
a currency exchange in order to repay one of the premium
loans. That currency exchange is the possible source of profit
potential, and by agreeing on that exchange rate the
partnerships and Deutsche Bank eliminated any profit potential
from these trades. See Tax Ct. Op. 17–18; see also Appellants’
Br. 11–12; Appellee Br. 13–15.

     Appellants emphasize that if there were no agreement to
fix the exchange rates that would be used when the winning
option paid out and the partnerships repaid the premium loans,
then how far the payouts would go toward covering the loans
would depend upon the actual movements of the euro and
krone against each other during the week between the trade
date and the settlement date. Appellants’ Br. 11. How far those
payouts would go toward covering the premium loans would
also depend upon movements of the euro and krone against the
U.S. dollar (because appellants’ books reflect U.S. dollar
values) during both that initial week and the remaining life of
the investment until the smaller payout on the losing option was
made. Id. at 11–12. In their view, the Tax Court’s finding of
                                2
rate “rigging” is unsupported by substantial evidence, thus
making clear the potential for profit as the deals were
structured.

    For example, if the krone-denominated loan were the
winning loan and the euro-denominated loan were the losing
loan, then the partnerships would receive a large payout in
kroner and would need to use that payout to repay a loan in
kroner and a loan in euros. To repay the latter, the partnerships
would need to exchange their remaining kroner (after repaying
the krone-denominated loan) for euros. Depending on the
exchange rate between the krone and the euro, the krone payout
could exceed the euro loan amount, resulting in a gain; or it
may fall short of the euro loan amount, resulting in a loss; or it
may exactly equal the euro loan amount, resulting in neither
profit nor loss. By fixing the rates, the partnerships and
Deutsche Bank ensured that the winning payout exactly
equaled the premium loans for both options, and thereby
eliminated the possibility of profit or loss attendant to this
currency exchange.
