United States v. Raymond, 228 F.3d 804, 811 (7th Cir. 2000), cert. denied, 533 U.S. 902, 121 S.Ct. 2242, 150 L.Ed.2d 230 (2001); see Gates v. United States, 874 F.2d 584, 586 (8th Cir. 1989). Courts applying § 6700 have identified four elements the government must prove: (1) organization or participation in the sale of certain investment plans or arrangements; (2) statements by the defendant regarding the allowability of deductions or tax credits, the excludability of income, or the securing of other tax benefits; (3) knowledge or reason to know that the statements are false; and (4) statements which pertain to a material matter. See Benson, 561 F.3d at 721-22; Gleason, 432 F.3d at 682; United States v. Estate Pres. Servs., 202 F.3d 1093, 1098 (9th Cir. 2000); United States v. Campbell, 897 F.2d 1317, 1320 (5th Cir. 1990). If each of the factors is satisfied, a district court may issue an injunction if it is "appropriate to prevent recurrence of such conduct."

Rather, a statement is material if it would have a substantial impact on the decision-making process of a reasonably prudent investor or concerns matters relevant to the availability of a tax benefit. See United States v. Campbell, 897 F.2d 1317, 1320 (5th Cir. 1990). The question of whether an alleged promoter's statements were knowingly false, or whether he or she had reason to know the same, requires an evaluation of what a reasonable person in his or her position would have discovered.

"The test for injunctive relief under § 7408 is satisfied if the defendant had reason to know his statements were false or fraudulent, regardless of what he actually knew or believed."United States v. Campbell , 897 F.2d 1317, 1320 (5th Cir. 1990) ; Benson , 561 F.3d at 724 ; United Energy Corp. , 1987 WL 4787, at *9.Campbell , 897 F.2d at 1320 ; United States v. Buttorff , 761 F.2d 1056, 1062 (5th Cir. 1985).

Rather, a statement is material if it would have a substantial impact on the decision-making process of a reasonably prudent investor or concerns matters relevant to the availability of a tax benefit. See United States v. Campbell, 897 F.2d 1317, 1320 (5th Cir. 1990). The question of whether an alleged promoter's statements were knowingly false, or whether he or she had reason to know the same, is a question which requires an evaluation of what a reasonable person in his or her position would have discovered.

The House Conference Report accompanying TEFRA indicates that the "reason to know" standard of Section 6700(a)(2)(A) "allow[s] imputation of knowledge so long as it is commensurate with the level of comprehension required by the speaker's role in the transaction." United States v. Campbell, 897 F.2d 1317, 1321-22 (5th Cir. 1990) (analyzing H.R. CONF. REP. NO. 97-760, at 572 (1982), reprinted in 1982 U.S.C.C.A.N. 1190, 1344). The "knew or had reason to know" standard therefore includes "`what a reasonable person in the [defendant's] . . . subjective position would have discovered.'"

To establish a violation of section 6700(a)(2)(A), the government must prove four elements about Mr. Koresko: 1) he organized or participated in the sale of certain investment plans or arrangements; 2) he made statements about the allowability of deductions or tax credits, excludability of income, or securing of other tax benefits; 3) he knew or had reason to know the statements were false; and 4) the statements pertain to a material matter. SeeU.S. v. Stover, 650 F.3d 1099, 1107 (8th Cir.2011); United States v. Benson, 561 F.3d 718, 721–22 (7th Cir.2009), cert. denied, 558 U.S. 1050, 130 S.Ct. 759, 175 L.Ed.2d 518 (2009); United States v. Gleason, 432 F.3d 678, 682 (6th Cir.2005); United States v. Estate Pres. Servs., 202 F.3d 1093, 1098 (9th Cir.2000); U.S. v. Campbell, 897 F.2d 1317, 1320 (5th Cir.1990).

I.R.C. § 6700(a)(2)(A). Section 6700's "reason to know standard" has been treated as equivalent to "should have known" and "allows imputation of knowledge so long as it is commensurate with the level of comprehension required by the speaker's role in the transaction" but does not include a duty of inquiry. United States v. Campbell, 897 F.2d 1317, 1322 (5th Cir. 1990). It is a violation of section 6700(a)(2)(B) for any person, in organizing or participating in any arrangement, to make or furnish a gross valuation overstatement as to any material matter.

Courts applying I.R.C. § 6700 have identified four essential elements of it that the government must prove: (1) organization or participation in the sale of certain investment plans or arrangements; (2) statements by the defendant regarding the allowability of deductions or tax credits, the excludability of income, or the securing of other tax benefits; (3) knowledge or reason to know that the statements are false; and (4) the statements which pertain to a material matter. See United States v. Benson, 561 F.3d 718, 721-22 (7th Cir. 2009); United States v. Gleason, 432 F.3d 678, 682 (6th Cir. 2005); United States v. Estate Pres. Servs., 202 F.3d 1093, 1098 (9th Cir. 2000); United States v. Campbell, 897 F.2d 1317, 1320 (5th Cir. 1990). If each of the factors is satisfied, a district court may issue an injunction if it is "appropriate to prevent recurrence of such conduct."

To establish that Ms. Lloyd engaged in conduct subject to penalty under § 6700, the United States must show: (1) that Ms. Lloyd organized or sold (or participated in the organization or sale of) an entity, plan or arrangement; (2) Ms. Lloyd made or caused to be made false or fraudulent statements concerning the tax benefits to be derived from the arrangement; (3) Ms. Lloyd knew or had reason to know that the statements were false or fraudulent; and (4) the false or fraudulent statements pertained to a material matter. United States v. Estate Pres. Servs., 202 F.3d 1093, 1098 (9th Cir. 2000); United States v. Campbell, 897 F.2d 1317, 1320 (5th Cir. 1990); see also United States v. Kaun, 827 F.2d 1144, 1149 (7th Cir. 1987) ("Under Section 6700, the government must prove that the defendant was involved in an "abusive tax shelter": that is, any entity whose principal purpose is the avoidance or evasion of federal income tax."). A.

Penalties can also be recovered from one who sells a service or product at a grossly inflated price (more than twice the correct value, see 26 U.S.C. § 6700(b)(1)(A) ), so that customers can claim excessive tax benefits. See id. § 6700(a)(2)(B) ; United States v. Campbell , 897 F.2d 1317, 1322 (5th Cir. 1990) (explaining that tax shelters based on gross overvaluations "eliminate the buyer's incentive to pay no more than the investment's value because the financing mechanism allows the buyer to save more in tax benefits than is paid for the investment. That economic incentive pushes the price above the value"); see also Autrey v. United States , 889 F.2d 973, 981 (11th Cir. 1989) ("[A] promoter is in essence strictly liable for grossly overstating the value of property or services based upon which an investor will attempt to take a deduction or credit.").