Miers' Firm Helped Ernst & Young Sell Abusive Tax Shelter
U.S. Supreme Court nominee Harriet Miers headed a Dallas law firm that helped Ernst & Young LLP sell a tax shelter that was later termed abusive, according to a Senate investigation.
A total accounting solution for client data management! Allows you to offer “Software as a Service”! Clients have access to a complete, fully integrated accounting software suite, while you can review and report real time financial data. SinglePoint combines the power, flexibility and security of software from Cougar Mountain Accounting with the advanced technology of a dedicated application server from Applianz Technologies. Learn more!
|Cougar Mountain Home||Cougar Mountain Accounting|
|Sign up for a Web Demo||Cougar Mountain Point of Sale|
|Request a Call||Cougar Mountain FUND|
The law firm, Locke, Liddell & Sapp, provided “deficient” opinion letters to support the shelter in 1999, according to the Senate Permanent Subcommittee on Investigations. Before the transaction was banned bv the Internal Revenue Service in 2002, Ernst & Young sold the shelter to more than 132 taxpayers, and earned more than $27.8 million in fees, the report said, according to Bloomberg.
The shelter, called a Contingent Deferred Swap, involved converting ordinary income into capital gains income, which is taxed at a lower rate. The report said that the law firm's opinion letter on the shelter eased the way for Ernst & Young. The letter was designed to give the taxpayer the basis to deny any knowledge of improper actions.
The letter told investors that they "should" be able to beat the IRS in court, the Washington Post reported. Senate investigators said Miers's law firm made about $3.5 million on transactions that were considered “potentially abusive or illegal.” The law firm's involvement was disclosed by the journal Tax Notes.
Miers co-managed the firm from 1999 to 2001, and the issue may serve as a complication as she seeks Senate confirmation for the high court.
Miers isn't a tax attorney and “was not tied to this in any way,” Jerry Clements, head of Locke, Liddell & Sapp's litigation department, told Bloomberg. Clements said the firm “stands by our reputation for high quality legal work in the tax field, and we stand by the advice and opinions we gave these clients.”
White House spokesman Allen Abney said, “The transactions involved appropriate tax strategies.”
Ernst & Young paid a $15 million fine in July 2003 to settle IRS allegations related to its marketing of tax shelters.
Voice of the Editor
Which isn’t completely true. I mean, occasionally I drop by when I manage to sneak out of the nonstop frat party over at Going Concern, but I’m mostly a wallflower over there. I’m happy to say that I’ve been given express permission (or explicit orders, if you like) to wander over here to AccountingWEB more often.
Why is that, you might ask? My job is to replace the irreplaceable Gail Perry as Editor-in-Chief. What does that mean? I don’t really know! I think it’ll be fun getting a feel for things, throwing in my own thoughts here and there, and listening to the discussions you’re having about the accounting profession.