by Brian Mahany
When will they learn? Three times this month we have reported on big banks and corporations that have suffered major court defeats after attempting to claim questionable tax deductions. This week’s IRS victory against Dow Chemical is just one more nail in the coffin of abusive tax shelters.
Wall Street bad boys Goldman Sachs and legal giant King & Spaulding allegedly concocted a complex tax scheme designed to exploit holes in the tax code. The IRS objected and ultimately the case was decided by a federal judge in Baton Rouge, Louisiana.
Said Chief Judge Brian A. Jackson, “tax law deals in economic realities, not legal abstractions.” He also upheld an assessment of penalties because any reasonable and prudent person should have known that the tax shelter was “too good to be true” and that “Dow viewed its tax department as a profit center.”
According to the opinion, the shelter was structured to allow Dow to claim depreciation deductions for a plant that already been depreciated . It also allocated income to offshore partners to avoid U.S. taxes.
We are constantly amazed that otherwise brilliant lawyers and accountants (accounting giant KPMG is often credited with creating shelters that are disallowed by the IRS) keep creating shelters that are disallowed.
Although Dow’s losses from the decision are reported to be $1 billion, we believe that the accountants, investment bankers and lawyers behind these transactions are liable for the bad advice they have dispensed. (Dow claims it may appeal and none of the lawyers and bankers involved in the transaction have admitted to any wrongdoing.)
If you lost money or suffered an adverse audit or tax court ruling because of bad advice from an accountant, lawyer or financial professional, give us a call. Our legal and accounting malpractice lawyers have helped businesses and individual recovery millions in damages. Many of the cases we handle involve phony tax shelters, bogus 419 and 412 plans and missed FBAR filings.
Mahany & Ertl – America’s Tax and Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. Services available in many locations.
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