Textron Must Hand Over Tax Prep Sheets to IRS

     (CN) – Textron, maker of Cessna planes and Bell helicopters, must hand over tax preparation papers that the IRS demanded in order to investigate possible tax-shelter violations, the 1st Circuit ruled.

     In 2003, an IRS audit of Textron’s 2001 tax return uncovered nine possible instances of tax sheltering, where Textron’s subsidiary Textron Financial Corp. bought equipment and leased it back to the seller on the same day.
     The IRS demanded to see the spreadsheets Textron had used while preparing its tax returns. These sheets listed items that the IRS might dispute and demand Textron to pay more taxes on. They also contained Textron’s calculations of the percent chance the IRS had of winning such disputes.
     Textron refused to release its work sheets, stating that the documents were prepared by attorneys and accountants in Textron’s tax department and thus protected under the “work product doctrine.”
     Citing decisions by the 1st and 5th Circuits, the Boston-based appellate panel noted that work product privileges exist only when documents are specifically prepared for litigation.
     Judge Boudin said Textron had not shown that the spreadsheets were meant for litigation. Rather, the papers were created to show Textron weak spots in its own tax return, the panel ruled.
     “Textron apparently thinks it is ‘unfair’ for the government to have access to its spreadsheets, but tax collection is not a game,” Boudin wrote.
     The court overturned a ruling that would have shielded Textron’s papers from the IRS.

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