In the case of WFC Holdings Corp. vs. the Untied States, Tunheim, judge for the U.S. District Court for the District of  Minnesota disallowed a claim that was based on an alleged capital loss deduction of more than $420 million stemming from a transaction involving the transfer of "underwater" commercial leases to a Wells Fargo subsidiary and a related sale of stock to Lehman Brothers. Tunheim held that the shelter acquired from KPMG served no purpose other than tax avoidance.

 

Billionaire banker D. Andrew Beal and others lost a case before the U.S. District Court of Appeals for the Fifth Circuit, based in New Orleans. In Southgate Master Fund LLC vs. United States, the court disallowed the company's attempt to allocate about $200 million in income tax deductions to Beal.

The decisions allegedly stemmed from Beal's acquiring a portfolio of non-performing Chinese debt for less than $20 million. He then disposed of the portfolio and generating more than $1 billion in artificial paper losses approximately equivalent to the debt's face value. Beal made the acquisition through a company that was treated as a partnership for tax purposes. However, the court affirmed a lower court's disallowance of monetary penalties sought by the Internal Revenue Service.

In the third case, another district court judge barred Principal Life Insurance Co. from claiming more than $20 million in foreign tax credits that the company had sought based on a complex transaction involving a $300 million payment to two French banks.

Judge John A. Jarvey of the U.S. District Court for the Southern District of Iowa determined that the transaction, which was designed by Citibank, was a loan rather than an equity investment, lacked economic substance and a business purpose beyond using foreign tax credits and violated a Treasury Department "anti-abuse" regulation.