Federal Jury Rejects Altria Group's $24 Million Tax Shelter Claim

WASHINGTON, July 10 /PRNewswire-USNewswire/ -- A federal jury in New York has
rejected the $24 million tax refund claim filed by Altria Group Inc. relating
to its investment in lease-in, lease-out (LILO), and sale-in, lease-out (SILO)
tax shelters, the Justice Department announced today. The verdict follows a
three-week trial in the Southern District of New York before U.S. District
Judge Richard J. Holwell.

The evidence at trial showed that Altria made purported investments in four
properties: a power plant in Georgia, a power plant in Florida, a Dutch
wastewater treatment facility and a New York Metropolitan Transportation
Authority rail yard in Queens. Altria claimed ownership of the properties,
which were owned by tax-indifferent entities (i.e., entities that do not
generally pay federal taxes), for the purpose of taking the tax deductions
which those entities could not. However, the jury found that Altria never
acquired the benefits and burdens of ownership and that the transactions
lacked economic substance. The jury accordingly rejected Altria's $24 million
refund claim.

The Justice Department has reported that hundreds of LILO and SILO
transactions were entered into by taxpayers in the late 1990s, and that
billions of dollars may be at stake in disputes over these transactions. The
government has prevailed in all four cases, including this one, where such tax
shelters have been challenged.

"This victory for the United States should serve as another warning to
taxpayers not to engage in abusive tax shelter transactions and that the
government will continue to shut these transactions down," said John Dicicco,
Acting Assistant Attorney General of the Tax Division.

Mr. DiCicco thanked IRS attorneys Abigail Foster Dunnigan, Steven Balahtsis
and John Aramburu for their invaluable assistance, and especially noted the
contribution that the late David F.P. O'Connor had made to the successful
resolution of this matter.

Assistant U.S. Attorneys David J. Kennedy, Robert William Yalen, Lawrence H.
Fogelman and Bertrand Madsen, and Special Assistant U.S. Attorney Matthew Von
Schuch of the Justice Department's Tax Division litigated this case.

SOURCE U.S. Department of Justice

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