Supreme Court Declines to Hear Wells Fargo’s Appeal of Economic Substance Doctrine – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner

by Bruce Givner on July 8, 2014

One June 9, the Supreme Court of the United States decided that it would not review a ruling from the Eighth Circuit Court of Appeals involving Wells Fargo and the economic substance doctrine.

Earlier this year, the Eighth Circuit affirmed the IRS’s disallowance of a $423 million capital loss claimed by a Wells Fargo subsidiary on the grounds that the underlying transaction lacked economic substance. For our blog post on this case, please click here.

Specifically, the Eighth Circuit ruled that a lease restructuring transaction entered into by WFC Holdings Corp. lacked economic substance despite the fact that the transaction generated non-tax economic profits and complied with the tax code. Wells Fargo’s appeal prompted the Law Offices of Givner & Kaye to file an amicus brief supporting the petition to have the bank’s case heard.

However, the government argued that the Court’s decision would not threaten legitimate transactions in the future, as this specific case involved what the government described as a prepackaged “tax product” sold to WFC by KPMG LLP for the purposes of creating an enormous tax loss.

Unfortunately for companies and practitioners, the Supreme Court’s decision not to hear the case leaves unresolved issues of economic substance. Given the matters at stake, we find it surprising that the Court would deny the petition. However, it is well-known that the Court prefers to resolve disputes where two circuit courts reach different decisions for the same transaction, so it is possible these questions may be addressed in the future.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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