Tax litigation has always been a significant part of the Firm’s
practice and our lawyers collectively have nigh on forty years
experience litigating US federal and state tax cases. As Associate
Chief Counsel (International), Washington managing partner John
Staples was in charge of more than 130 I.R.S. attorneys nationwide
who were litigating cases for the I.R.S.. His was the final legal
word on all I.R.S. cases his attorneys tried, including pricing,
treaty and tax shelter cases among others.
We have set down 35 cases for trial, and tried 9 of them to
completion, including through the federal appeals courts where
necessary. We won eight of the nine.
The Firm has brought 35 federal and state tax cases of every sort
since 1987. The amounts in issue in these cases exceeded $400
million. We settled all but nine of them on very favorable terms,
and tried the remaining nine, winning eight.
Our cases have been of all kinds: “fact” cases, where the law was
clear but the facts in dispute (S&L Entertainment Enterprises, B.V.
v. United States), “law” cases, where the facts were clear but the
law in dispute (Tate & Lyle Inc. v. Commissioner) and mixed “fact
and law” cases (A.E. Staley Mfg. Co. v. Commissioner). So far, we
have won every tax case we have tried but one.
Some of the issues we have tried include:
1. A.E. Staley Mfg. Co. v. Commissioner, 119 F.3d 482 (7th Cir.
1997), rev’g 105 T.C. 166 (1995). Staley spent more than $25 million
to defend itself from a hostile takeover. It ultimately lost and was
taken over. The I.R.S. disallowed the deductions Staley took for
these defense costs as ordinary and necessary business expenses.
Other taxpayers lost the first two cases on this point. The trial
judge in the Tax Court agreed with us, but the full panel of the Tax
Court decided (over five dissents) that the defense fees should be
capitalized. The Seventh Circuit distinguished the leading Supreme
Court case, INDOPCO, Inc. v. Commissioner, 503 U.S. 79 (1992), and
ruled in our favor that unlike friendly takeover expenses, the cost
of defending a business and its policies from attack are deductible.
Staley is the lead case in this area, and I.R.S. dropped its
objections to deducting these expenses after it lost the Staley
2. Racal Electronics and Subsidiaries v. Commissioner, T.C. Memo
1990-494. Racal made a loan to a 65% subsidiary, which later became
worthless. The I.R.S. denied a deduction for the worthless debt on
several grounds, including that the loan was actually a capital
contribution. After a fact-intensive inquiry covering 13 factors
that distinguish debt from equity, the Tax Court concluded that the
loan was bona fide and allowed the deduction.
3. Tate & Lyle Inc. and Subsidiaries v. Commissioner, 103 T.C. 656
(1994). This case concerned the validity of I.R.S. legislative
regulations on deferred interest payments to a foreign parent.
Treas. Reg. § 1.267(a)-3. We won this case at the Tax Court in a
Court reviewed decision, all 19 judges participating, on the grounds
that 1) the Treasury exceeded their statutory mandate, and 2) the
regulations were unconstitutional under the Due Process Clause
because of their retroactive effect. However, after we won the
client decided that they would have been better off having lost, due
to the interplay of various carry-forward rules. Therefore we did
not defend the case when the I.R.S. appealed. Another law firm
defended the appeal as a “friend of the court,” on behalf of a
Canadian company, but lost. Tate & Lyle Inc. and Subsidiaries v.
Commissioner, 87 F.3d 99 (3d Cir. 1996).
4. S&L Entertainment Enterprises, B.V. v. United States, 1980 U.S.
Ct. Cl. LEXIS 1248. The U.S. Court of Claims held that the benefits
of the U.S.-U.K. income tax treaty were available to a “lend-a-star”
structure employing, among others, Led Zeppelin, Lawrence Olivier,
and Jack Higgins.
5. The Racal Corporation and Decca Electronics, Inc., 1993 N.Y. Tax
LEXIS 208 (May 13, 1993). In this New York state tax case, we proved
that Racal was entitled to treat certain indirect holdings as
subsidiaries, resulting in favorable tax treatment under
then-existing law. The case prompted New York to change its rules.
The full Tax Court, all 19 judges, reviewed two of the cases we
tried in the Tax Court because these cases had substantial
precedential value. Staley is the leading case allowing large
corporations to deduct the costs of unsuccessfully defending a
hostile takeover. cf. INDOPCO. Tate & Lyle remains the leading case
for the proposition that a legislative I.R.S. regulation can be
voided on constitutional grounds. Our cases have been cited as
precedent in subsequent cases at least 60 times and more than 120
times overall, including scholarly articles and I.R.S. guidance.
Most of the Firm’s lawyers had substantial tax litigation experience
before they joined the Firm. A brief description of their litigating
Dan Burt. Dan Burt tried his first
case in 1970 and his first tax case in 1978. Since then he has tried
a large number of cases to completion, both tax and non-tax and
continues to participate in litigation in both the U.S. and the U.K.
John Staples. John Staples
began litigating with the Firm when he first joined it in 1991. He
then went to the I.R.S. and was the I.R.S.’ chief international
litigation lawyer from the time he became Associate Chief Counsel
(International) until he left the I.R.S. on March 31 2003. While at
the I.R.S. he participated in or was responsible for pricing cases,
international tax shelter cases, treaty cases, and all other cases
involving international issues.
Jonathan Jackel. Jonathan Jackel
was a trial attorney in the U.S. Department of Justice, Tax Division
for four years before he joined the Firm. Before that he clerked for
the Honorable Renato Beghe of the U.S. Tax Court. While at Justice
he tried tax cases of all kinds in Federal district and bankruptcy
courts. These cases involved tax shelters, inventory, pensions,
fraud, and the credit for producing fuel from a nonconventional
source, among other issues. He also litigated civil rights, Privacy
Act and Freedom of Information Act (“FOIA”) cases. Jonathan has
continued to try cases continuously since joining the Firm.
Forbes Maner. Forbes Maner has
been trying tax and non-tax cases since 1978. At least half of his
litigation has been on tax cases, and he was part of the team who
tried the Staley and Racal cases described above. Forbes also has
litigated oil and gas pricing, environmental compliance, and FOIA
In addition, Susan Segar served as
a clerk to
a judge of the U.S. Tax Court.
Burt, Staples & Maner, LLP attorneys have more than seventy five
years of combined trial experience in tax cases in every tax court
of first instance the US Federal courts system offers. They have
also handled tax disputes in the following states: California,
Florida, Illinois, Maine, Massachusetts, Montana, Oregon, New
Jersey, New York, North Carolina, and Tennessee.