It’s not shocking that Wal-Mart would do this, but the judge didn’t really say what they did was wrong either. He just said the rent transactions didn’t have any real economic substance, whatever the hell that means.
A North Carolina state judge ruled against Wal-Mart Stores Inc (WMT.N) in a tax shelter case where the retailer paid itself rent and later counted that amount as a tax deduction.
Wal-Mart had transferred ownership of its stores to various in-house real-estate investment trusts (REITS), and then cut its tax obligation by taking deductions for rent payments that never left the company.
In a judgment signed on December 31, Emergency Special Judge of Superior Court Clarence Horton Jr. ruled “there is no evidence that the rent transaction, taken as a whole, has any real economic substance,” other than for cutting Wal-Mart’s taxes.
On a side note, Wal-Mart also announced they will be bringing in in-house shoppers to increase their sales this quarter to cover the tax bill.
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