In Uncategorized on 02/26/2018 at 14:06

We know very well “(T)he process of distilling truth from the testimony of witnesses, whose demeanor we observe and whose credibility we evaluate, is the daily grist of judicial life. He must be careful to avoid making the courtroom a haven for the skillful liar or a quagmire in which the honest litigant is swallowed up. Truth itself is never in doubt, but it often has an elusive quality which makes the search for it fraught with difficulty.” Diaz v Com’r, 58 T. C. 560, at p. 564. Sorry about the “he,” ladies, this was written forty-six years ago, in the Bad Old Days.

Even more is the foregoing the case where years of practice and twenty-year-old settlements meet Section 482 reallocations and ongoing negotiations. Here, testimony and documents are both in play.

So who better to deal with these arcana than that classical scholar and fellow-alumnus with my fellow-blogger Peter Reilly, CPA, of a distinguished New York City high school, Judge Lauber?

He’s got two, and both deal with Warren Buffet’s darling Coca-Cola and Subsidiaries. There are two orders (both in Docket no. 31183-15, filed 2/26/18).

First up, the famous 1996 closing agreement. The Cokers want it in, IRS wants it out, and moves to exclude in limine. You remember the famous 1996 closing agreement, that got its own full-dress T. C.? No? The see my blogpost “Things Go Better with Coke,” 12/14/17.

IRS says each year stands on its own, so what they agreed to twenty-plus years ago means nothing today. The Cokers claim the 1996 agreement will allow them to offset certain dividends against royalty obligations.

Judge Lauber: “Respondent’s contention that the 1996 closing agreement is irrelevant in determining the arm’s-length character of the affiliates’ payments to petitioner during 2007-2009 does not mean that the closing agreement should be excluded from evidence as irrelevant for all purposes of this case. Both parties are free to make whatever arguments they wish to make concerning the relevance of the 1996 closing agreement to the legal issues this case presents. The Court will evaluate those arguments on their merits, but we will do so after admitting the closing agreement and related documentation into evidence.” Order, at p. 2.

But wait, there’s more!

In another order (same docket number and filing date), it’s Canada and not Mexico. The Cokers and IRS are chilling a beef about a Canadian subsidiary. IRS claims the Cokers want to stip to stuff beyond the scope of the settlement, and so anything about the Canadians should be excluded from this trial, eh.

And if Judge Lauber lets it in, IRS wants to call some current or former Coke bigwigs to testify, and a couple IRS types to put them right.

Judge Lauber says I’ll listen to it all; y’all can object to any evidence offered, and IRS can call a reasonable number of its staffers and any or all of the Coke wigs IRS named in their papers.

The judicial mill is open, so send it all in.


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