Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
John Hancock Loses $560 Million Tax Lawsuit
Author: Scarinci Hollenbeck, LLC
Date: August 23, 2013
Key Contacts
Back
The U.S. Tax Court recently ruled against the John Hancock Life Insurance Co. in a tax lawsuit involving hundreds of millions in deductions, Bloomberg News reports.
The court opposed John Hancock’s argument that tax deductions on a series of leveraged lease transactions – including depreciation, rental and interest expense, and transaction costs – amounting to $560 million were valid. The issue involves the insurance company’s use of lease-in-lease-out and sale-in-lease-out transactions – notably referred to as LILO and SILO. These transactions occur when companies purchase sizable assets, which are then leased to third parties for use. Most companies then adopted the practice of claiming deductions on the assets, Bloomberg notes.
Since 2008, however, the IRS has determined that these types of transactions are vehicles for improper tax avoidance. The agency claims that firms cannot legally claim deductions under federal law because they never actually owned the assets. After giving companies a chance to terminate LILOs and SILOs in exchange for 20 percent of the savings, the IRS has won a series of cases relating to these vehicles.
In John Hancock’s tax case, the IRS argued that the transactions “lacked economic substance and the substance of the transactions is not consistent with their form.” U.S. Judge Harry Haines agreed with the federal agency on the latter half of the argument, according to his court opinion.
“John Hancock did not acquire the benefits and burdens of ownership” wrote Judge Harry Haines.
However, he did not directly address the economic substance argument, which may give the company some room to appeal the decision. In an emailed statement, John Hancock alluded to the possibility of appealing the ruling.
“We continue to believe our position on the tax treatment of our lease investments was appropriate and factually distinguishable from other recent cases addressing the tax treatment of leverage lease investments,” wrote Roy Anderson, a spokesman for Bloomberg.
- Locations: Red Bank, NJ, New York City, Washington, D.C., Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda
On February 14, 2025, the Office of General Counsel (OGC) of the National Labor Relations Board (NLRB) under Acting General Counsel William B. Cowen issued Memorandum 25-05, “New Process for More Efficient, Effective, Accessible and Transparent Case handling.” The Memorandum rescinds nearly all of the Memoranda issued by his direct predecessor, Jennifer Abruzzo, setting the […]
Author: Matthew F. Mimnaugh
What Are FIRPTA Withholding Requirements?
If you purchase real property from a foreign person or entity, you may be required to withhold taxes from your payment to the seller under the Foreign Investment in Real Property Tax Act (FIRPTA). The federal tax law is designed to ensure that foreign sellers pay any applicable capital gains tax on profits realized from […]
Author: Jesse M. Dimitro
Does Your Homeowners Insurance Provide Adequate Coverage?
Your home is likely your greatest asset, which is why it is so important to adequately protect it. Homeowners insurance protects you from the financial costs of unforeseen losses, such as theft, fire, and natural disasters, by helping you rebuild and replace possessions that were lost While the definition of “adequate” coverage depends upon a […]
Author: Jesse M. Dimitro
Understanding the Importance of a Non-Contingent Offer
Making a non-contingent offer can dramatically increase your chances of securing a real estate transaction, particularly in competitive markets like New York City. However, buyers should understand that waiving contingencies, including those related to financing, or appraisals, also comes with significant risks. Determining your best strategy requires careful analysis of the property, the market, and […]
Author: Jesse M. Dimitro
Fred D. Zemel Appointed Chair of Strategic Planning at Scarinci & Hollenbeck, LLC
Business Transactional Attorney Zemel to Spearhead Strategic Initiatives for Continued Growth and Innovation Little Falls, NJ – February 21, 2025 – Scarinci & Hollenbeck, LLC is pleased to announce that Partner Fred D. Zemel has been named Chair of the firm’s Strategic Planning Committee. In this role, Mr. Zemel will lead the committee in identifying, […]
Author: Scarinci Hollenbeck, LLC
Novation Agreement Process: Step-by-Step Guide for Businesses
Big changes sometimes occur during the life cycle of a contract. Cancelling a contract outright can be bad for your reputation and your bottom line. Businesses need to know how to best address a change in circumstances, while also protecting their legal rights. One option is to transfer the “benefits and the burdens” of a […]
Author: Dan Brecher
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
John Hancock Loses $560 Million Tax Lawsuit
Author: Scarinci Hollenbeck, LLC
The U.S. Tax Court recently ruled against the John Hancock Life Insurance Co. in a tax lawsuit involving hundreds of millions in deductions, Bloomberg News reports.
The court opposed John Hancock’s argument that tax deductions on a series of leveraged lease transactions – including depreciation, rental and interest expense, and transaction costs – amounting to $560 million were valid. The issue involves the insurance company’s use of lease-in-lease-out and sale-in-lease-out transactions – notably referred to as LILO and SILO. These transactions occur when companies purchase sizable assets, which are then leased to third parties for use. Most companies then adopted the practice of claiming deductions on the assets, Bloomberg notes.
Since 2008, however, the IRS has determined that these types of transactions are vehicles for improper tax avoidance. The agency claims that firms cannot legally claim deductions under federal law because they never actually owned the assets. After giving companies a chance to terminate LILOs and SILOs in exchange for 20 percent of the savings, the IRS has won a series of cases relating to these vehicles.
In John Hancock’s tax case, the IRS argued that the transactions “lacked economic substance and the substance of the transactions is not consistent with their form.” U.S. Judge Harry Haines agreed with the federal agency on the latter half of the argument, according to his court opinion.
“John Hancock did not acquire the benefits and burdens of ownership” wrote Judge Harry Haines.
However, he did not directly address the economic substance argument, which may give the company some room to appeal the decision. In an emailed statement, John Hancock alluded to the possibility of appealing the ruling.
“We continue to believe our position on the tax treatment of our lease investments was appropriate and factually distinguishable from other recent cases addressing the tax treatment of leverage lease investments,” wrote Roy Anderson, a spokesman for Bloomberg.