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Bank of New York Case Tests IRS Power to Halt Foreign Tax Abuses

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At www.propublica.org

In November 2001, Bank of New York, a mid-tier U.S. bank, transferred nearly $8 billion of its own assets to a trust in the small, business-friendly state of Delaware through several layers of newly created companies. A mixture of home mortgages, shares and other securities, the transferred assets made up almost 10 percent of the bank's total assets at the time. Yet, the transaction was not discussed with BNY's regulators; nor was it noted in the bank's financial statements or annual report. It had little practical effect on the lender's day-to-day operations -- the assets continued to be managed and serviced by the same employees in New York. But it was a critical first step in setting up a complex structure known as STARS -- structured trust advantaged repackaged securities -- which IRS claims was used as an abusive tax shelter that has cost more than $1 billion in tax revenue...

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At www.propublica.org


 

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