Dow Chemical's $1 Billion Tax Shelter Stinks: Court

http://www.forbes.com/sites/robertwood/2013/02/27/dow-chemicals-1-billion-tax-shelter-stinks-says-court/

But the court said these investment partnerships were shams just designed to artificially create tax losses. One deal (Chemtech I) was marketed by Goldman Sachs under the trade name SLIPS, for Special Limited Investment Partnership. Tax deals, it should be noted, often come in branded offerings with acronyms. The other (Chemtech II) was designed by top law firm King & Spalding.

Both were highly complex transactions involving byzantine partnership tax rules. Often, tax shelters involve cobbling together parts of the tax code that were probably never meant to be combined. When combined, they can yield—at least on paper—losses many times the size of the real dollars at stake. Few deals are as big as Dow Chemical’s, which handily shielded a whopping $1 billion in tax deductions.

At least that’s how Dow’s tax returns were filed. And with illustrious firms like Goldman Sachs and King & Spalding behind the wizardry, it may have seemed too good to be true. It turns out it was. A federal court in Louisiana rejected the deals by Dow Chemical that purported to create approximately $1 billion in tax deductions.