Tax Notes Quotes Mark Allison on ConEd Case

Mark D. Allison is quoted by Tax Notes concerning the Federal Circuit's January 9 reversal of a lower court's favorable decision regarding expense deductions that Consolidated Edison Co. took in connection with a leasing transaction, holding that the deductions must be disallowed based on a substance-over-form analysis.  For the complete article, please click on the above PDF.

Excerpt taken from the article.

The initially favorable decision that ConEd received in the lower court was an exception, because most of the leasing shelter cases resulted in wins for the government. The Federal Circuit's reversal gives the Justice Department a string of victories in the courts on the issue of deductible expenses incurred in LILO and sale-in, lease-out transactions (BB&T Corp. v. United States, 523 F.3d 461 (4th Cir. 2008); Altria Group Inc. v. United States, 694 F. Supp.2d 259 (S.D.N.Y. 2010); and AWG Leasing Trust v. United States, 592 F. Supp.2d 953 (N.D. Ohio 2008)).

"While the Federal Circuit decision is disappointing for LILO participants, it is hardly surprising given the trend of the courts generally on these types of transactions and specifically in light of the circuit's Wells Fargo decision," said Mark D. Allison of Caplin & Drysdale. That the foreign lessee holds and operates the asset during the term of the transaction and the purchase option funding is fully defeased "appears to serve as a virtual mental roadblock to any view that the purchase option would not be exercised," he said.