January 22, 2009 / 8:00 AM / 10 years ago

U.S. court rules Textron can keep paperwork from IRS

Jan 22 (Reuters) - A U.S. Federal appeals court ruled that Textron Inc (TXT.N), the world’s largest maker of corporate jets, can withhold some documents related to tax shelters from the Internal Revenue Service (IRS), court documents show.

The 1st U.S. Circuit Court of Appeals in Boston on Wednesday said Textron’s tax-accrual work papers are privileged.

The appeals court also ordered a lower court to reconsider whether the IRS can force the Providence, Rhode Island-based company to turn over documents prepared by its auditors, Ernst & Young LLP.

“The central issue is whether Textron’s tax-accrual work papers are protected from IRS summons because they are attorney work product,” the ruling read.

The IRS had been trying to obtain Textron’s tax-accrual papers as part of an investigation into whether the company used illegal tax shelters.

Tax-accrual workpapers provide support for a taxpayer’s financial statement tax reserves, according to the website of lawfirm McDermott Will & Emery, which is not directly involved in the case.

The papers are sensitive because they identify the taxpayer’s judgment about the issues for which the results under the tax laws are unclear, according to the firm’s website.

The IRS could not be immediately reached for comment by Reuters. (Reporting by Ajay Kamalakaran in Bangalore; Editing by David Holmes)

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