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.
- Practices: Tax and Trusts & Estates, Corporate Transactions & Business, Sophisticated Estate Planning & Wealth Preservation
- Locations: Red Bank, NJ, New York City, 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
When a Child Turns 18: The Gap in Your Family’s Estate Plan
Once a child turns 18, parents lose the automatic legal authority to make medical and financial decisions on their behalf, even if the child still lives at home or remains on the family’s insurance. Three documents close that gap: a durable power of attorney, a health care proxy or directive, and a HIPAA authorization. For […]
Author: George McGowan
Business Mediation: An Overview and Practical Tips
Business mediation is a confidential, voluntary process in which a neutral third party helps companies negotiate a resolution to a commercial dispute without going to trial. Because working with a mediator is very different from litigating in the courtroom, it is important to understand how commercial mediation works, when it makes sense for your dispute, […]
Author: Paul Grossman
Top 5 Causes Leading to Construction Defect Litigation
The five most common causes of construction defect litigation are design defects, substandard materials, workmanship defects, code violations, and subsurface defects. Because these flaws can compromise a building’s integrity, functionality, or safety, they frequently lead to disputes involving multiple parties and high financial stakes. Key takeaways: What is Construction Defect Litigation? Construction litigation is complex, […]
Author: Paul Grossman
How to Protect Your New Jersey Business When Going through a Divorce
The most effective ways to protect your business in a divorce are put in place before one begins: a prenuptial or postnuptial agreement, clean separation of business and personal finances, and divorce contingencies built into your operating or buy-sell agreements. If divorce is already underway, the priorities shift to establishing how the business is classified […]
Author: Jay McDaniel
10 Common Issues in Franchise Disputes
The most common franchise disputes involve breach of contract, franchise termination and non-renewal, intellectual property rights, territorial encroachment, royalty and fee payments, franchisor support obligations, and violations of state franchise laws such as the New Jersey Franchise Practices Act. Franchisors and franchisees can often resolve these conflicts by providing written notice detailing the dispute and […]
Author: Paul Grossman
Reputational Risk and Legal Exposure: Why New Jersey Businesses Must Manage Them Together
New Jersey businesses must manage legal and reputational risk together because modern disputes play out on two fronts at once: the legal proceeding itself and the court of public opinion, where customers, employees, investors, and business partners often reach conclusions long before a judge or jury has had the opportunity to evaluate the facts. Success […]
Author: Sean M. Pena
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.