The government got a big victory in the U.S. Court of Federal Claims, winning a reversal of a 2004 decision in a case legal experts say will go a long way in defining what constitutes an illegal tax shelter by reestablishing the economic substance test.
The court's decision against Coltec Industries Inc. is a notable decision in the war over corporate tax shelters. In 1996, Coltec reported a capital loss of more than $378 million on its tax return -- a loss generated by the company selling high-basis stock for a relatively low price. Now-defunct accounting firm Arthur Andersen suggested, and signed off on, the strategy.
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