The Internal Revenue Service has won a major victory as a federal court has struck down the use of a popular tax shelter.

In recent years, the I.R.S. has cracked down on the use of the shelter, known as son of Boss, which has helped shield hundreds of millions of dollars, most of it new wealth created by the 1990s technology boom, from income taxes.

The United States Court of Federal Claims found that an investment partnership set up by the Ervin brothers of Kentucky was an invalid tax avoidance scheme, without any economic substance.

The three brothers sold their cable business in 1999, making more than $40 million. They then sought to diversify their holdings, working with a hedge fund, Sentinel Advisors, on a venture in the euro currency market.

The brothers had sought tax refunds from the government, contending that the investment vehicle they had formed, Jade Trading, was "a bona fide partnership, formed for the express purpose of making money from trading."

But Judge Mary Ellen Coster Williams ruled that the brothers' claim that each had invested and lost $15 million in options trades was false, and that each had invested only about $150,000.

"In sum, this transaction's fictional loss, inability to realize a profit, lack of investment character, meaningless inclusion in a partnership, and disproportionate tax advantage as compared to the amount invested and potential return, compel a conclusion that the spread transaction objectively lacked economic substance," she wrote, according to Reuters.

Lynnley Browning in the New York Times says that the ruling could have implications for Deutsche Bank, which is being investigated by federal prosecutors in Manhattan over its role in similar questionable tax shelters.

And Jesse Drucker in the Wall Street Journal notes that the ruling may hurt the defense in the criminal trial of former executives at the accounting firm KPMG, who were involved in similar deals for their clients.