HP Loses in Tax Court to IRS

Hewlett-Packard lost out to the Internal Revenue Service in a case involving over $190 million in tax refunds that HP has claimed from a foreign tax credit generator.

The case involved a sophisticated tax strategy designed by AIG Financial Products in 1996 and funded by the Netherlands-based bank ABN-Amro, according to Reuters. AIG created an entity called Foppingadreef in the Netherlands in which HP invested. The Palo Alto, Calif.-based computer maker claimed capital loss deductions and over $178 million in indirect tax foreign tax credits as a result of the investment and sued the IRS for nearly $200 million in tax refunds in 2009.

But Judge Joseph Goeke ruled Monday that HP was not entitled to more than $15.5 million in capital losses after it sold back its shares in Foppingadreef in 2004 to ABN-Amro.

“We hold that petitioner’s investment in FOP is more appropriately characterized as debt for federal income tax purposes and that petitioner is not entitled to deduct a capital loss for the sale of his interest in FOP,” he wrote.