Wells Fargo liable for penalties for engaging in abusive tax shelter scheme
This follows a Minnesota jury’s verdict on Nov. 17, 2016, that ruled Wells Fargo was not entitled to those foreign tax credits because the transaction lacked both economic substance and a non-tax business purpose.
After a three-week trial, the jury in this case was asked to determine whether Wells Fargo’s STARS transaction had economic substance, and the jury made some key factual findings.
Wells Fargo contended that STARS was a single, integrated transaction that resulted in low-cost funding, but the jury found that in reality, the transaction consisted of two economically distinct and independent transactions: a loan and a trust.
The jury found that the trust structure had no reasonable potential for pretax profit and that Wells Fargo entered into the trust structure solely for tax reasons. The jury also found that Wells Fargo entered into the loan solely for tax-related reasons. ■