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Lehman Brothers sues government for $110.3 million of overpaid taxes
By Caroline Salls
Pittsburgh, April 13 - Lehman Brothers Holdings Inc. filed a lawsuit Tuesday against the United States of America in an attempt to recover $110.3 million in overpaid federal income taxes and penalties, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.
Lehman said the tax reporting positions at issue resulted from 1999 and 2000 transactions in which it lent stock issued by U.K. corporations to Lehman Brothers International (Europe) plc.
Under the U.K. tax law and the provisions of the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains, Lehman said it incurred U.K. taxes on substitute payments received from Lehman Brothers International in connection with the stock loan transactions.
Lehman said it claimed $141.41 million of foreign tax credits on its 1999-2000 tax returns for the U.K. taxes it incurred in connection with the substitute payments.
According to the lawsuit, the Internal Revenue Service proposed adjustments to the tax returns related to the stock loan transactions, including a disallowance of the $141.41 million in credits and reduction of taxable income in an amount equal to the disallowed credits, resulting in a $91.92 million net increase in the company's tax liability.
The IRS also proposed imposition of $18.38 million in accuracy-related penalties.
In addition to the return of the allegedly overpaid amounts, the company is seeking deficiency interest and overpayment interest on the amounts to be refunded.
New York-based Lehman Brothers Holdings Inc. was the fourth-largest investment bank in the United States. The company filed for bankruptcy on Sept. 15, 2008. Its Chapter 11 case number is 08-13555.
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