Wal-Mart's Leaky Tax Shelter

"A North Carolina state-court judge ruled against Wal-Mart Stores Inc. in a closely watched tax-shelter case involving an arrangement in which the retailer essentially paid rent to itself and then deducted the amount from its taxes. ... The judge dismissed Wal-Mart's suit, in which it sought a refund of $33.5 million in taxes, interest and penalties that it paid after state tax authorities determined that it had underpaid by that amount. ... 'Plaintiffs do not deny the facts demonstrating the circular journey taken by the "rents" paid by these plaintiffs, but contend that on each leg of the journey plaintiffs were only taking advantage of a lawful deduction afforded them by then-existing tax law,' wrote Judge [Clarence] Horton. 'Such a piecemeal approach exalts form over substance, however'," WSJ, 5 January 2008.

Francine McKenna has a nice post on this at http://www.retheauditors.blogspot.com/, 5 January 2008. Ernst & Young (E&Y) is apparently another Big Four firm with an incomplete accounting library. I read somewhere that CPAs should respect "substance over the form". Apparently, E&Y must be made aware of this. See also my 24 October 2007 post on Wal-Mart.