MEMORANDUM & ORDER This case arises from a failed investment in the film industry. Plaintiff Jerome Swartz, a retired engineer and wealthy investor, invested a total of $4.5 million in two LLCs that financed films.1 He claims that his investment proved worthless and that he abandoned his interests in the LLCs. Swartz sought to carry back these losses and thereby claim a refund on his previously-filed tax returns. The IRS denied the deduction, and plaintiff filed suit seeking a refund. The United States moves for summary judgment. BACKGROUND Swartz was an accomplished engineer who focused on aircraft and computer technology. ECF No. 54 10; ECF No. 57 1; ECF No. 51-7. He retired in 2004 and then focused on investing, particularly in entertainment. ECF No. 57
2-3. In August 2007, Swartz invested $1.5 million in securities of CT1 Holdings, LLC, a “global entertainment company” that owns, finances and distributes films. ECF No. 54 2. In the purchase agreement, Swartz stated that his net worth was above $50 million and that he had $800,000 in gross income in 2005, $1 million in gross income in 2006, and expected more than $2 million in gross income in 2007. ECF No. 51-2 at 3.2 Swartz also acknowledged in the purchase agreement that his investment was “highly speculative” and that he had been advised that he “should consider an investment in the interests only if [he] is able to afford a loss of [his] entire investment.” Id. at 12. Two months later, Swartz invested another $1 million in Alliance Film Finance, LLC, which also finances and distributes films. ECF No. 54 3. That purchase agreement similarly warned him that his investment was “speculative, involves a high degree of risk and should be considered only by accredited investors who can bear the economic risks of their investments for an indefinite period and who can afford to sustain total losses of their investments.” ECF No. 51-3 at 5. And, like the agreement with CT1, it required him to warrant that he was “acquiring the [i]interests for investment purposes.” ECF No. 54 11. In this purchase agreement, Swartz stated that his net worth was above $70 million, that he had earned $782,000 gross income in 2005, $4.1 million gross income in 2006, and expected to earn $4 million in gross income in 2007. ECF No. 51-3 at 15. Swartz made an additional $2 million investment in CT1 on March 20, 2008, which was earmarked for the film “Love Ranch.” ECF No. 54 4.3 Swartz admitted that he had no consulting role related to this movie “other than having watched” it. ECF No. 54 27. Swartz’s investments did not give him any control over the LLCs, both of which were controlled by a man named David Bergstein. ECF No. 54
