Tax Notes Quotes Mark Allison: Tax Court Strikes Down John Hancock's LILO/SILO Transactions

Tax Notes

Mark D. Allison  spoke with Tax Notes to discuss the Tax Court's August 5th decision holding that the majority of a sample of 27 leveraged lease transactions entered into by John Hancock Life Insurance Co. failed a substance-over-form analysis and should be recharacterized as loans, resulting in the creation of original issue discount income and the disallowance of various deductions.  For the complete article, please visit Tax Notes' website (subscription required).
Excerpt taken from the article "Tax Court Strikes Down John Hancock's LILO/SILO Transactions" by Amy S. Elliott, Jaime Arora, Matthew R. Madara, and Andrew Velarde for Tax Notes
Mark Allison of Caplin & Drysdale said that given that other courts have systematically rejected LILO/SILO transactions, the Tax Court's decision was not surprising. He said he thought it was interesting that the Tax Court primarily relied on the substance-over-form doctrine rather than the economic substance doctrine.
Allison said the Tax Court gave the taxpayer a moral victory when it concluded that the government failed to establish that the test transactions lacked economic substance. However, that victory was short-lived after the Tax Court examined whether the transactions' substance followed their form, he said.


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