The U.S. Tax Court, in a case of first impression, upheld the majority of more than $559 million in tax deficiencies against John Hancock Life Insurance Co. (U.S.A.), finding the company was not entitled to tax deductions for several lease-in/lease-out and sale-in/lease-out transactions (John Hancock Life Ins. Co. (U.S.A.) v. Commissioner,  141 T.C. No. 1, 8/5/13).

Judge Harry A. Haines analyzed several LILO and SILO transactions involving Hancock, and “found that in each case the substance of the transaction [was] not consistent with its form.”

Haines concluded the LILO transactions and one SILO transaction more closely resembled financial arrangements. The other SILO arrangements, Haines said, were not eligible for deductions because Hancock did not acquire present ownership interests in the transaction properties.