Eliminate the last four sentences (beginning The Compaq case) in the carryover paragraph to p. 544 of the student edition in the paragraph beginning "Tax shelters are" of the practitioner edition. After that elimination add the following paragraph as a new paragraph:
A good example of a classic tax shelter is Compaq Computer Corp. v. Commissioner, 113 T.C. 214 (1999), rev’d 277 F.3d 778 (5th Cir. 2002). Please read both the Tax Court and the Appellate opinions now. In net, a classic abusive tax feature present in the case is that, except for the benefit of the foreign tax credit for foreign taxes paid that Compaq did not bear the economic burden, the deal was a money-loser. The Tax Court viewed the transaction as abusive and imposed penalties; the Fifth Circuit blessed the transaction. It was a tax shelter; it was just a tax shelter that, at least the appellate court, believed – or at least held, regardless of what it believed – was legal and not abusive. Both the Tax Court and the Fifth Circuit are good courts, with good judges having radically different views of what is an abusive tax shelter and where to draw the line. (Note the Fifth Circuit’s opinion, however, has not worn well with time.)For practitioners, the only footnote in the paragraph is at the end to support the statement that the Fifth Circuit decision has not worn well with time. The footnote is:
fn E.g., Bank of N.Y. Mellon Corp. v. Commissioner, ___ F.3d ___, 2015 U.S. App. LEXIS 15993 (2d Cir. 2015) (“In so holding, we agree with the Federal Circuit in Salem and disagree with decisions of the Fifth and Eighth Circuits (Compaq and IES, respectively));” Lee A. Sheppard, The Fun Goes Out of Foreign Tax Credit Planning, 148 Tax Notes 1283 (Sept. 21, 2015) (hyperbolically, as is her wont, “The Second Circuit essentially reversed the Compaq and IES decisions.”)
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