Tax Court - Transaction lacked economic substance; foreign tax credits denied  

February 11: The U.S. Tax Court today held that the taxpayer’s transactions lacked economic substance and thus upheld the IRS determinations of income tax deficiencies for the 2001 and 2002 tax years.

The case is: Bank of New York Mellon Corp. v. Commissioner, 140 T.C. No. 2 (February 11, 2013)


The Tax Court addressed three issues—


  • The Tax Court held that the taxpayer was not entitled to foreign tax credits under section 901 claimed in connection with the transaction because it lacked economic substance.
  • The Tax Court held that the taxpayer was not entitled to deduct certain expenses incurred in connection with the transaction because it lacked economic substance.
  • The Tax Court concluded that income attributed to a trust with a U.K. trustee used to effect the transaction was U.S. source income rather than foreign source income.

Read the Tax Court’s opinion: Bank of New York Mellon [PDF 548 KB]



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