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Tax Shelters: Will They Stand Up?
The IRS has taken a predatory stance against tax shelters. But several court decisions have altered the rules of the chase.
Another company to notch a court victory is United Parcel Service. Last fall, it successfully appealed a huge adverse Tax Court verdict in the 11th Circuit Court. The IRS argued that in 1983, when UPS formed a Bermuda-based subsidiary to offer insurance on packages to its customers, the transaction served no business purpose other than to confer tax-free benefits on UPS shareholders. The estimated liability of the company was $1.8 billion. UPS, however, convinced the court that the transaction did have a valid business purpose. "The state insurance commissioners were starting to exert their influence, and we didn't want to be regulated by 50 different insurance commissioners," says UPS spokesman Norman Black.