The Wall Street Journal Quotes Mark Allison on $1 Billion Dow Tax Shelter Case
The Wall Street Journal quotes Mark D. Allison concerning a federal court's rejection of two tax-shelter transactions conducted by Dow Chemical Co. that created about $1 billion in improper deductions. The court also imposed penalties on the chemical producer.
Excerpt taken from the article.
The shelter in question was marketed during the 1990s by Goldman Sachs Group Inc. under the name SLIPs, short for Special Limited Investment Partnerships. In a typical shelter, a big multinational company would form a partnership with offshore banks and use the structure to generate artificial deductions for itself. In one instance, according to the court, Dow sought inappropriate deductions for royalties it paid to the partnership for the use of its own patents. In the other, it used a partnership to claim depreciation deductions for a plant it had already depreciated. Income purportedly generated by the partnerships was allocated to offshore partners so Dow wouldn't owe tax on it. Such partnership-based shelters became popular in the 1990s.
But the Internal Revenue Service has attacked them aggressively and largely successfully, according to Mark Allison, an attorney with Caplin & Drysdale in New York. "While the case is important for Dow and its shareholders, these transactions long ago ceased being marketed due to IRS attacks and changes in the law," Mr. Allison said. "Corporate taxpayers have lost on highly marketed and structured products like this one, but they are all in the past."