Wells Fargo's $82M Refund Claim Denied for Lacking Economic Substance

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The U.S. Court of Appeals for the Eighth Circuit Aug. 22 affirmed the denial of an $82 million tax refund to WFC Holdings Corp., the parent company of Wells Fargo Bank N.A., because the underlying transaction lacked both economic substance and a non-tax business purpose (WFC Holdings Corp. v. United States, 8th Cir., No. 11-03616, 8/22/13).
In affirming a decision by the U.S. District Court for the District of Minnesota, the court held that WFC was not entitled to a tax refund for a capital loss it claimed as a result of a complex transaction involving the transfer of underwater leases and the sale of stock (193 DTR K-1, 10/5/11).
In 1996, Wells Fargo & Co., WFC's predecessor, acquired First Interstate Bancorp, with which it had overlapping geographical footprints. WFC ended up with a large number of leased properties that it did not need. Many of those leases were for amounts greater than amounts for which WFC could sublease the properties.

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